Once someone has passed away, the executor of that person’s estate needs to get hold of a “Grant of Representation”. This document gives them the legal right to deal with the estate. To do this, however, the entire estate has to be properly valued, including the contents of any property owned by that person. This needs to be done even if the beneficiaries of the person’s estate are not planning on selling.
To value house contents for probate requires everything in the house to be listed and a market value placed against that item. This is not what an item cost, as many will be old and would fetch little if sold and others many have increased in value. The best way to get an accurate valuation is to employ professional help.
Keeping Assets Safe
While a person’s property is going through the probate process, it may well be left empty and unattended. It’s important that very early on in the process the executor should ensure that “Unoccupied Property Insurance” cover is put in place. During the early days after a person’s passing this kind of detail is probably far from everyone’s mind, but it is an important precaution. Once the property has been left unoccupied for more than 30 days it can be difficult to find an insurer willing to provide cover.
Inheritance Tax Issues
Inheritance Tax (IHT) is payable on any estate above a certain value, so it is important to get this right. If you undervalue an estate and the mistake later comes to light, not only will you be required to settle-up with the tax man, you may be prosecuted for tax evasion. On the other hand, if you over-value, you may be paying a tax bill you don’t need to. If the value of the estate is likely to be low, certainly less than £250,000, then an estimate is often accepted. Where a house is involved, however, it is likely that the estate will be more than this and an accurate valuation is more appropriate.
Under the current rules a person’s estate is tax free for the first £325,000. This is known as the ‘nil-rate band threshold’. That rises to £650,000 for couples as the rate is transferable between those who are married or in civil partnerships. There is now (as of 2019) also the ‘main residence’ allowance of £150,000 giving an individual a total tax-free allowance of £475,000 where a property is part of the estate. Any value above that is taxed at 40%.
There are occasions where further exemptions may apply to increase the level of the nil-rate band, but these vary, and you should always seek advice on whether any of these apply to you.
If inheritance tax is due on an estate, you have to submit the relevant paperwork to the tax office within a year, and there are penalties for missing this deadline. You also have to start paying the tax within 6 months of the person dying, whether the valuation is complete or not. Getting the valuation done promptly helps in this process.
Calculating the Value of the House Contents
However great the sentimental value of a person possessions, it’s a simple fact that most of them will not have any great financial value. That said, there may well be some that can surprise you and have a significantly higher value than expected. Antiques, old furniture, old books and jewellery often fall into this category. This is why it pays to employ experts who keep abreast of a wide range of markets, understand the current climate and have the knowledge to accurately assess the market value of a wide range of objects.
So, the sensible approach when starting the valuation process is to go through the house and list the items you think may have value. Getting these valued early on can give you a good indication of whether-or-not you might be under the threshold for inheritance tax.
Pay particular attention to, and look out for:
- Antique furniture
- Antique pottery
- Old Books
- Original artwork
- Older jewellery
- Jewellery with gemstones
- Gold items
- Musical instruments
- Designer and top branded, clothes, shoes and hand-bags
- Modern, nearly new and high-quality electronics such as TV’s, HiFi systems and computers.
A good way to check if an item may be valuable is to look at the persons home contents insurance policy. Valuable items are usually listed to show they are significant, although be a little cautious as this is usually the purchase or replacement value, not what the item could get if sold today.
For jewellery, a valuation for the whole collection is fine unless any of the items are worth more than £500. In this case those individual items should be listed separately.
Once you have done this, you can take a view on the remaining items. Checking online to see how much similar items would cost if bought new is a good start. You then allow for their devaluation to allow for wear and tear, age or damage and relevance. A mobile phone or tablet computer may be in pristine condition, but if it’s been superseded by the next versions or models, it’s not likely to be worth much at all.
If in doubt, or daunted by the task where there are a lot of items to go through, get help. Provided you employ a reputable professional it saves you a lot of time and work. You you’ll also get a more accurate valuation. Most people consider this worth the cost and well worth the investment.
Don’t forget that other items have real value, as well as objects. You should also check drawers and file boxes for items in the house such as:
- National savings
- Share certificates
- Premium Bonds
- Collections, such as stamps coins or figurines
- Salary or pension payments still due
- Life Insurance and Pension policies
- Social security and benefit claims to see if any money is still due.
- Union or Trade association memberships.
Looking into the details of these document and policies could reveal another source of money. This could then be reclaimed for the estate and add to it’s value.
If the person was still employed when they died, then get in touch with their employer. You can find out if any salary was still due. If they were in the company pension scheme, the employer can also help with getting in touch with the pension provider.
Stocks and shares can be more complicated to value. The figure changes daily and you need the value at the time the person died.
Membership of a union or trade association often has associated benefits. These may include life insurance and death benefits and should be checked.
Making the Wise Choice
You can do your own valuation for contents of a house, but getting it right is a challenge. There are a lot of resources you can look up online and refer to that will help. The problem is none of those will be able to set eyes on, hold and really evaluate each-and-every item. It can be a major undertaking. The temptation will be to shortcut the process and go with estimates and gut feeling rather than a true valuation. While this can seem the sensible thing to do at the time, it can lead to serious problems later on.