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Why Properly Valuing Assets For Probate Is Key

When a loved one dies, it is never easy for those left behind who need to manage their affairs and deal with obtaining probate, as well as manage their own grief – nor is it necessarily straightforward for a Personal Representative, whose role it is to administer that person’s estate.

A vital part of the Probate process is valuing the assets of an estate as at the date of death, and it’s important to do this properly or there could be Inheritance Tax and/or Capital Gains Tax implications at a later date.

“The probate process can be complex as all the assets need to be valued correctly to ensure the right level of Inheritance Tax is paid. Inheritance Tax needs to be paid before the probate application is even submitted,” comments Nina Sperring, Solicitor at Bartletts Hoole office.

“While it adds to the time it takes to obtain Probate to an estate, it is important to adopt a thorough approach and obtain formal valuations or you could face potential penalties or pay more tax than you should in the long run. The valuation is key when it comes to Capital Gains Tax too, and is another reason why the valuations should be done carefully and not guesstimated.”

What Needs To Be Valued?

All assets of the deceased person’s estate should be valued. If there is property involved that it is usual to obtain more than one valuation and for one of the valuations to be prepared by a RICS qualified Valuer. It is important not to guesstimate valuations as this could have Inheritance Tax and/or Capital Gains Tax implications further down the line.

Every estate will be different but as a guide, the following will need to be valued:

  • Money in bank accounts
  • Investments and shares
  • Property and land
  • Jewellery and personal items
  • Life insurance policies that form part of the estate

If The Valuation Is Too Low

If assets are valued on the low side, you could expose the estate to Capital Gains Tax in the future.

If the asset is sold and there is a gain since the date of death valuation then HMRC may recalculate the Inheritance Tax owed. Alternatively, HMRC may view it as a gain during the administration period and Capital Gains Tax could be payable.

If The Valuation Is Too High

If assets are valued on the high side, you end up paying too much Inheritance Tax on the estate.

If an asset is sold during the administration period and within 4 years of the date of death, and is lower than the probate valuation then a claim can be made to HMRC for a refund of Inheritance Tax paid.

Why Do Assets Need To Be Professionally Valued?

Getting the value of the assets right is important because it determines how much Inheritance Tax is paid and forms the basis for any Capital Gains Tax owed if an asset is sold at a later date.

When valuations are submitted to HMRC, they are assessed and HMRC may challenge any valuations they feel are either too high or too low. HMRC has the power to impose penalties and can add to the interest on any tax due, so it’s definitely worth getting a professional to value the assets.

A professional, such as a stockbroker to value shares or an estate agent to value land or property, will submit the valuation in writing – and a written valuation is far less likely to be challenged by HMRC.

How We Can Help With Valuing Assets For Probate

Our professional Wills and Probate solicitors are here to help you with all aspects of probate, including advice on the best way to value assets and submitting the application for probate.

To speak to one of our specialist solicitors about any probate-related query you have or to find out more about our probate services, contact us on 0800 988 3674 or 01244 311 633 or email advice@bartletts.co.uk