Probate Valuation

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Handling property inheritance: valuation & home clearance after someone dies

When a family member dies, you, as the inheritor of their property, will have a large job on your hands. As well as informing friends and relatives and making funeral arrangements, you will need to have the deceased’s property valued and cleared. This is a difficult task at a difficult time, and it is understandable that you may not want to deal with solicitors and the taxman or sort through your loved one’s property during this period. Unfortunately, this is all part of the process. Here is a look at what you need to do, and how you can make it easier.

Get a probate valuation of the property

If you are specified in the deceased’s will as an executor— someone who can deal with their estate—you will need to apply for a grant of probate from the probate registry. Once this has been approved, you will need to look into a probate valuation in order to ascertain exactly how much the property is worth. This will determine how much you will inherit, and whether this inheritance will be taxable or not. If the property is worth more than £325,000, you will have to pay 40% inheritance tax on this value. If you are planning on selling the property and its value increases between you acquiring it and selling it, you may also be liable for capital gains tax on the difference.

The value of the property is worked out not only from its market value, but from the probate value of the house contents (known as goods and chattels). Probate valuation involves determining the resale value of these items, as they are deemed part of the assets of the estate.

In order to get a probate valuation of the property, you will need to enlist a professional valuer. Here at Clearance Solutions we offer an expert probate valuation service. This will involve an experienced, qualified and independent valuer visiting your property to assess the the value of its contents. We will send you a report of our findings within 24 hours of this visit. For more information, visit our probate valuation service page.

Have the property cleared

House clearance after someone dies is another fundamental part of the process, as whatever you decide to do with your loved one’s home, you will need to clear the property of possessions that are no longer needed. This means you will have to sort through your loved one’s personal belongings. It will likely be an emotional process, and you may not feel like doing it straight away, but don’t worry about needing to take your time with this. Banks or lenders tend to be sympathetic to this kind of situation, and inheritance tax doesn’t have to be paid for up to 12 months. If you feel like you just can’t face it, give yourself some time and don’t feel like you should be rushed. You might also want to enlist someone who can help you through the process.

You should sort possessions into items that you want to keep, items that you want to sell or donate, and items that you want to throw away (after they have been valued). Make sure you set aside valuable possessions like jewellery, antiques and paintings and discuss with your family whether they should be sold or kept. If you and your family members can’t decide about who should keep what, set aside these objects until the end, at which point hopefully emotions have settled. It is also important that you set aside all important financial documents, including wills, bank statements, insurance forms, receipts and all other sensitive documents (some of these you might want to shred).

Once you have sorted out what you no longer want to keep, you will need to make sure that these items are disposed of. If there is an abundance of possessions that need to be cleared, it is worth getting a clearance company to do this for you. Here at Clearance Solutions, we provide a house clearance service to do just this.

Our service is cost-effective, as the resale value of each item will be taken into account of what we charge you. We can clear all types of household items, from furniture and electrical goods, to junk and bric-a-brac, and can pick it up from any location on a property. We also ensure that the service is environmentally friendly by either recycling the items we take or donating them to good causes. For more information, please visit our house clearance page.

Valuing personal property for probate – why get an independent valuation?

Chattels and house contents rarely make up a significant proportion of the value of an estate. However, they will often pose the greatest practical issues for an executor and can be subject to competing claims. For this reason, a prudent executor will want a clearly itemised and properly valued inventory.

Probate valuation must be based on the open market value at the time of death, as set out in section 160 of the Inheritance Tax Act of 1984. Any valuation which does not explicitly state the correct basis will be viewed with suspicion. Phrases such as “for probate purposes” will not give HMRC confidence that the valuer understands the legal requirements.

Consequently, an independent probate valuation service can offer expert assessment of how much house contents and chattels are worth, in a way which is fair to all parties.

Avoiding delay

A typical estate will contain a substantial number of items, all of which must be taken into account when providing a valuation for probate purposes. Someone approaching the task for the first time might have to look up hundreds of individual items to identify the few of value. In contrast, an experienced valuer will easily be able to make a correct assessment for standard items and concentrate on the unusual or valuable items.

There are other clear advantages to an independent approach in terms of risks of delay, particularly when a local tax assessor is unhappy with a chattel valuation. In these instances, the valuation will be referred to the HMRC Shares and Asset Valuation team (SAV), which typically results in a delay of between four and ten months.Where the correct basis for valuation is applied, the risk of an additional referral will be very low.

Impartial valuation

Despite generally being only a small proportion of the value of an estate, chattels are often the cause of disputes between legatees, often including the executor. Having an independent and professional valuation is one sure way of demonstrating impartiality.

Where an executor undertakes the role of valuer, there is obviously a potential conflict of interests, particularly in cases where the estate is over the inheritance tax threshold.

Valuing on the correct basis

Everyone will be aware that trade and retail values are different, but the value for probate must be based on the open market value at the time of death. All probate valuations must be shown to be on this basis, and a common form of difficulty is the use of vague terms such as “probate values” or “fair value”, which do not give tax assessors any confidence that the valuer has understood their duty.

For art and antiques valuation, past auction results are the main resource used to assess open market value. The great advantage here is that very large databases of completed sales are available, allowing close comparisons to be found for most items. Attempting to value antiques without access to subscription databases is a difficult task, with the likely outcome being a mixture of retail and wholesale prices.

For clients, there is also the considerable advantage in that prices for much of the antique furniture likely to be found in the average house are currently severely depressed at auction, so that a professional valuation may well be substantially lower than the valuation the executor would have entered by themselves.

Overpayment

Following on from the above, an amateur valuer may well err towards overvaluation and find themselves paying too much tax as a result. This can be for several reasons. Most people have objects which have been highly valued in the family, but this does not lead to a high open market value.

This is what economists call “the endowment effect”, whereby one’s own property seems more valuable to an individual purely by virtue of emotional attachment. Another reason is simply an ignorance of how low many standard household contents are valued in the secondary market. This is as true of antique furniture as it is of electrical goods.

Disparity between the value of a house and its contents

The official guidance on probate valuation states that items over £500 should be individually listed. This can lead to a misunderstanding that items under this limit are of less importance, whereas the SAV stress that all goods are taxable. Generally, cheaper goods will be lotted together at auction (often at low estimates), and the same approach can be used on a valuation form to achieve a fair price, which still takes account of all the contents.

Sometimes a very expensive house will not have contents to match. Actually this is not uncommon, but when a tax assessor makes risk assessment of a probate valuation, the overall value of the estate will be an obvious yardstick. In these situations an independent valuation will be advisable.

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