What is a probate valuation?
A probate valuation is used for probate and Inheritance tax calculations in order to correctly asses the estates tax liabilities. They are required for the purpose of completing the PA1 and IHT application forms. The Value of an item will be based upon the open market value, meaning the price that the items might reasonably be sold for on the open market.
Who is responsible for obtaining professional Valuations?
The executor or administrator of the estate is responsible for providing the correct information to the probate office and HMRC. Ensuring the proper valuation of the estate is one of the main duties of an executor. When a solicitor has been instructed it is part of their responsibility to ensure they have correctly identified and valued the estate when applying for probate on the executors behalf.
Why do I need a professional probate valuation of house contents and property?
Having professional valuations for property and belongings will help to ensure a smooth and efficient application process.
These valuations are used to form the total value of the estate for tax purposes. Professional evaluations are less likely to be queried by HMRC.
Valuations provided by someone without the relevant or necessary knowledge could result in the over or under valuing of an item. This may lead to HMRC querying the value causing delays to the estate administration and in some cases can result in penalties.
Professional valuations can also be used when calculating tax liabilities on items that have been left as a gift or ‘legacy’ to specific beneficiary.
What kind of Assets would require a probate Valuation?
A property is often the most expensive asset that a person will own and therefore will make up a large part of the estates total Value. When having a property valued for probate it is important to show you have made reasonable effort to provide an accurate value. When a property is part of an estate a district valuer at the capital taxes office will assess the valuation given. If they believe the value to be incorrect they will query the application. An executor may be asked to Justify the value by providing the original valuations from the estate Agents, who may also be asked to justify their valuation.
It is recommended to use the Royal Institution of Chartered Surveyors (RICS) as they can provide a written probate report which is fully complaint to HMRC Inheritance Tax law. A RICS valuation in most cases is deemed satisfactory and will mean that it is less likely the district Surveyor will question the valuation.
- Possessions of Significant Value
It is important to assess if any items owned by the deceased are of a high value as this can affect the overall total of the estate. Items that may require a professional probate valuation are Jewelry, Antiques, Works of art or collections. Examples listed but not limited to on the IHT 407 : Household and personal goods are antique furniture, paintings, sculptures and porcelain, collections of books, stamps, coins, medals and wines. If you have a professional valuation you would send a copy along with the form.
- Vehicles, boats and aircrafts
You can use comparative market figures to make a reasonable judgement on a cars value. However it is recommended to have a professional valuation for vintage or collectible cars.
- House hold Items (chattel)
You do not need a professional evaluation on household items or personal items with a value of less than £500. An estimated market value, defined by HMRC as a realistic selling price, is sufficient.
Which HMRC forms will I need when dealing with a probate Valuation?
You will need the following forms when dealing with a probate valuation. These forms can be taken from the HMRC website. They can be downloaded or printed.
You will need to attach the professional valuation when filling in these forms and sending them back to the HMRC.
Schedule IHT 404 – Jointly owned assets.
Schedule IHT 405 – Houses, land, buildings and interest in land.
Schedule IHT 407 – For jewelry, vehicles, boats, aircraft, antiques, works of art, or collections
Schedule IHT 408 – This is for household and personal goods donated to charity