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Probate Valuations - The Fundamentals

Published: 04/12/2020 By Felicity Wright (Rural Chartered Surveyor)

A probate valuation is a valuation of a property or asset when someone passes away.  A Probate valuation can be undertaken by a RICS Registered Valuer and is often confused with a market appraisal which is undertaken by an estate agent.

Probate valuations are very important, and it is vital that there is proper co-ordination between the experts acting on your behalf such as valuers, solicitors and tax advisers, to ensure that the valuation of the assets are properly considered and tax liabilities are mitigated where possible. Woolley and Wallis have an excellent team that are able to assist with providing the required valuation advice.

The following questions are frequently asked:

1.    Do I need Probate to sell the property?

All assets held in the deceased’s sole name, will be ‘frozen’ upon death and until a Grant of Probate has been obtained.  An Executor of the estate is required to ‘prove’ that the Will in their possession is the last Will of the deceased. If the deceased did not have a Will, then the Court will appoint an administrator to deal with the deceased’s estate, which is typically a close relative or solicitor.

Probates is an Order of the Court officially granting the Executor the permission and power to administer the estate.  Once a Grant of probate has been issued, the Executor or Administrator is able to sell the deceased property.

2.    What basis of values are used?

The property will be valued as at date of death and the statutory definition of market value is:

‘‘The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.’

3.    How long does a Probate application take?

The duration of a Probate application will vary depending on the complexity of the estate.  It is difficult to predict how long the process will take, but a Grant of Probate is usually issued within three weeks from the date the Probate Registry receives the papers.  This will depend on whether the Inheritance Tax (IHT) has been paid before the application is submitted, however, problems may rise if the Executor is unable to access the deceased’s assets to pay the tax.  

Nonetheless, HM revenue & Customs (HMRC) will usually agree to a payment plan in which monthly instalments will be paid until the sale of the property is completed.

4.    What requires valuing?

All of the deceased assets and liabilities will need to be valued as at date of death, this can include property assets, cash in bank accounts, investments, life policies and personal effects and chattels. All items will be valued to determine the worth of the estate and how much IHT will be paid.

Valuations are typically required when the items are going to be sold as opposed to the items being passed to a surviving spouse or partner.

5.    Is a formal valuation required?

Valuations for ‘Capital Gains Tax & Inheritance Tax purposes’ can be carried out by the Executor/Administrator who are able to provide their opinion of the value of the property, but it is considered that they may not have enough experience to provide an accurate value.  

It is, therefore, preferable and advisable that a qualified Chartered Surveyor is appointed to ensure that the assets are correctly valued and that no unnecessary IHT is being paid.  Additionally, a Chartered Surveyor will be able to defend the valuation should the District Valuer become involved and will be able to negotiate on behalf of the Estate, should any queries be raised.

A Probate value is very important as it will be used as a base value when calculating any Capital Gains Tax (CGT) should the property increase in value during the administration period or when the property is latterly sold and the property has been sold for more than the Probate value.

6.    What happens if the sale price is lower than the Probate value?

If the property is sold within 4 weeks of the date of death and the sale price is lower than that of the figure provided within the Grant of Probate then a claim can be made to HM Revenue & Customs for a refund of overpayment.

7.    What happens if the sale price is higher than the Probate Value?

If the property is sold quickly after that Grant of Probate and the sale price is more than the figure submitted for Probate, HMRC may try to substitute the sale price instead of the probate value and recalculate the IHT liability. This can be challenged and negotiated with the District Valuer if necessary.  On the other hand, HMRC may view the increase to be a gain and thus Capital Gains Tax may be payable.

8.    Selling a property following a probate valuation:

Should you wish to sell the property once Grant of Probate has been received, Woolley and Wallis will happily advise on the most appropriate marketing strategy in order to maximise marketing potential to achieve an efficient sale.

Should you have any queries or require any valuation advice, in confidence and without obligation, please contact Felicity Wright f.wright@w-w.co.uk or 01672 515252.