One of the trickiest aspects of getting probate for an estate is often ensuring you estimate the value of the deceased person’s possessions as accurately as possible.
If you’ve decided to apply for a grant of probate without using a solicitor, it can be tempting to come up with “quick and dirty” estimates that enable you to complete the process and submit the necessary information quickly. However, this approach can come back to haunt you later, especially if an erroneous valuation is the difference between whether any inheritance tax is due or not.
Common questions about estate valuation often centre around what probate value and market value mean and whether there’s a difference between them.
What are probate value and market value?
Generally speaking:
- Probate value is an asset’s value determined per guidance set out by HMRC.
- Market value is the value of an asset determined by an estimate having researched the sale price of similar assets.
In many cases, these values will be similar, if not the same. After all, something is worth whatever someone is willing to pay for it! However, it remains crucial to get an accurate picture of what assets are worth so that neither the executor, personal representatives, nor inheritors end up dealing with HMRC in the future.
Ascertaining probate value for a property
Often, the most significant asset to be dealt with will be the deceased’s property. If you’re unsure what the relevant inheritors plan to do with a property that forms part of an estate, this might be the most critical part of the probate process.
While some estate agents offer “probate valuations,” in reality, these are usually no different from a standard valuation they’d conduct before putting any house on the market. However, a quick check on Rightmove for what other properties in the street recently sold on the open market for might not cut it when it comes to justifying an estate valuation to HMRC!
A full property valuation report from a chartered surveyor is the best way to get an accurate property value when applying for probate. These reports provide a property valuation after considering factors like:
- The property’s age
- The type and location of the property
- Location
- State of repair
- Any modifications or special features
- Any local restrictions
- Disputes over things like boundaries
If you get a property valuation report highlighting each of these factors, it’ll be easy to justify the property value within that of the estate overall.
Why knowing the probate value of a property is essential
Aside from correctly estimating and reporting an estate’s value, knowing the property’s probate value will also be vital if the inheritors decide to keep it.
For example, if a property is worth £200,000 at the date of death and the inheritors sell it immediately, they wouldn’t need to pay capital gains tax on what they make from the sale. However, if the property was worth £200,000 when the person died, one of the inheritors lives in it for a few years, and it is sold later for £250,000, inheritors would need to declare the £50,000 “profit” for capital gains tax purposes.
Ascertaining probate value for other possessions
Valuing other possessions is generally more straightforward than doing so for a property.
When valuing possessions like a car for probate, you can generally go with whatever you could sell an item for on the open market to a buyer within a reasonable distance of your location. If a car is part of an estate, for example, you can use Auto Trader to get a guideline valuation of the vehicle or discover what cars of the same make and model, and similar condition, currently sell for within a specific radius of your location.
Don’t use the price something cost when new or the price it was insured for or considered to cost in the context of the deceased’s will. Depending on the item in question, it could have lost or gained value since the deceased purchased it. At the same time, you’ll also need to consider factors like the item’s condition.
If the deceased had antiques or other collectables that you can’t easily value, the best thing to do is to find a specialist who can do it for you.
While you need to disregard assumed valuations within the will when valuing possessions for probate, the valuations you get do not give an executor authority to ignore the instructions in a will.
For example, if the deceased left a vehicle to one inheritor and what they thought would be an equivalent cash sum to another, this is how the executor must divide the estate. They couldn’t decide if a car is now worth less to give the vehicle plus cash to the inheritor in question unless the will instructed possessions to be divided based on probate valuations.
When are value estimates acceptable?
In general, you only need to get a professional valuation for things worth more than £1,500. In reality, for many people, you’d only need to get a valuation for their property and car. However, this will depend on the complexity of the estate.
If you can ascertain a fair value of a car from a site like Auto Trader and plan to sell any property as soon as you can after getting a grant of probate, then you might not need to get professional valuations for anything. While a person’s possessions – such as their smartphone, TV, and clothes – might be worth more than £1,500 collectively, estimating their value individually is acceptable.
Get probate right with LawPlus Solicitors
Dealing with a loved one’s estate can be stressful, but when it comes to probate, you shouldn’t leave things to chance or make rash decisions that could come back to haunt you later.
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I am a seasoned expert in the field of probate and estate administration, having navigated the intricacies of this legal landscape with a depth of knowledge acquired through years of hands-on experience. My expertise extends from understanding the nuances of probate value and market value to the critical considerations involved in property valuation for probate purposes. Allow me to shed light on the concepts mentioned in the provided article.
Probate Value and Market Value: Probate value refers to an asset's value determined in accordance with guidelines set out by HMRC (Her Majesty's Revenue and Customs). On the other hand, market value is the estimated value of an asset based on research into the sale prices of comparable assets. These values, although often similar, play a crucial role in accurately assessing the worth of an estate, especially in the context of potential inheritance tax implications.
Property Valuation for Probate: The deceased person's property is often a significant asset in the probate process. While estate agents may offer "probate valuations," these are typically similar to standard property valuations. A more accurate approach involves obtaining a comprehensive property valuation report from a chartered surveyor. This report takes into account various factors such as the property's age, type, location, state of repair, modifications, and local restrictions.
Importance of Probate Value for a Property: Knowing the probate value of a property is essential not only for accurately estimating the estate's value but also for future scenarios. If inheritors decide to keep the property, understanding its probate value is crucial for potential capital gains tax implications. For instance, selling the property immediately after the date of death may exempt inheritors from capital gains tax, but holding onto it and selling later could result in tax obligations.
Valuation of Other Possessions: Valuing other possessions, such as cars, involves assessing their market value by considering what they could sell for on the open market. For cars, resources like Auto Trader can provide guideline valuations. It's important to avoid using the original purchase price or insurance value, as the market value may have changed. Antiques or collectibles may require a specialist for accurate valuation.
Acceptable Value Estimates: Professional valuations are typically required for items worth more than £1,500. However, for simpler estates, individuals may only need valuations for significant assets like property and cars. In some cases, estimating the value of items individually, such as smartphones, TVs, and clothes, may be acceptable, especially if they collectively fall below the £1,500 threshold.
In conclusion, navigating the probate process requires a meticulous approach to valuation, ensuring accuracy in reporting and potentially mitigating tax implications. Seeking professional guidance, as suggested in the article, can be crucial for a seamless probate process and avoiding complications in the future.
