How do you value a house & its contents for Probate?
Probate is the legal process where you manage a deceased person’s possessions and allocate their money, assets and belongings once they have passed away – this is known as their ‘estate’.
From the outset of probate it will be essential to calculate the total value of the estate to find out if Inheritance Tax (IHT) is required to be paid.
More often than not, one of the largest assets that a person will own is their home and all their belongings inside. So, we’re going to take a look at how to value a house and its contents for probate.
Valuing property and contents for probate
One of the most crucial parts of the probate process is valuing the deceased’s home and possessions.
Throughout the administration of the estate, you will need to keep a log of how much money is being transferred into and going out of the estate.
This allows you to track total remaining debts owed and work out how much inheritance remains to give to the beneficiaries who are entitled to it.
If the estate is accountable for IHT, you will need to calculate how much. You will then be required to pass all this information to HM Revenue & Customs (HMRC).
Valuing a house and its contents can be a difficult task, but there are processes which you can follow to make it easier. This will help you in the long run as it lessens the risk of a dispute with HMRC.
How to value house contents for probate
The first stage when valuing the contents of a house is to make a list of items which you think might be worth something e.g. cars, jewellery and furniture.
Next, do some research on the internet to find out how much the items are worth or sold for, taking into consideration their age and condition.
For specialist antique items it is advisable to seek a professional valuation. This will ensure the items are valued by someone who has the relevant expertise to provide an accurate valuation.
How to value a property for probate
It is important to remember when calculating the value of a property or land that there are various factors impacting the price of it.
These factors include development land opportunities, remedial maintenance needed on the property and sales of similar properties in the surrounding area.
If the estate is liable for IHT, it would be prudent to seek a valuation from a Chartered Surveyor. As Chartered Surveyors are skilled and experienced in providing valuations specifically for IHT, their valuations are much more likely to be approved and acknowledged by HMRC.
How to get a property valuation for probate
To ensure the accuracy of a property valuation, the District Valuer Service (DVS) of HMRC will need to check and examine the valuation presented to them. If the DVS think the valuation is wrong, they will contest it and ask for additional evidence to back up the valuation given.
If executor(s) of an estate negligently obtain a property valuation they could be at risk of being fined. Equally, if executor(s) found the valuation sent to HMRC was too low, they will have to contact the HMRC in writing to advise them of the correct value.
If the deceased person’s property was jointly owned with someone else, known as ‘joint tenants’, then the property value will need to be split down the middle to find out what the deceased owned.
However, if the property was owned jointly with someone else as ‘tenants in common’, then the value will need to be worked out along the lines of what proportion of the property the deceased owned e.g. 60/40 split between owners.
Working out the value of the estate for Inheritance Tax
IHT will only need to be paid if the value of the estate surpasses the nil-rate band. For the 2022/23 tax year the nil-rate band is £325,000.
If the Estate is worth less than £250,000, HMRC will probably be happy with an estimated value.
However, if the estate is worth more than £325,000, it will be obligatory to pay IHT, unless there are exceptions that allow you to increase the threshold.
It is crucial to understand that when valuing the estate for IHT you need to calculate the ‘gross’ value of the taxable estate. The taxable estate includes all assets which are owned by the deceased, plus any gifts in the 7 years before they passed away.
Apart from the deceased’s home and contents, other assets will need to be looked into such as bank accounts, pensions, investments, shares and life insurance.
Speak to an expert about valuing a property and its contents for probate
To speak with one of our specialist Wills & Probate Lawyers, please call us now on 0117 952 0698 or Make A Free Will Enquiry and we will discuss your current circumstances with you and explain all available options available to you.
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