Managing and dealing with probate property valuation in a deceased estate is the often complex task of the executor. or the administrator. This complexity is not surprising, given that ‘property’, in the broader sense, includes everything the deceased owned when they died.
All these assets now belong to their heirs according to the will, or if there is no will, then to their close relatives. The executor, or administrator, is in charge of distributing these assets, according to strict legal principles.
Legal Duties of an Executor or Administrator
The person managing all the property in a deceased estate may not proceed until the UK tax authority has confirmed they may do so. If there is a legal will, the executor must apply for probate first. If there is no legal will, then a suitable person must apply for letters of administration.
The person managing the estate may only proceed with the following preliminary tasks, after they have received their authorisation:
- Lay their hands on all the financial documents belonging to the deceased.
- Provide a copy of the death certificate to every organisation affected.
- Open a bank account on behalf of the estate, with themselves as signatory.
Managing Deceased Estate Property
The tasks of executors and administrators are these, in a nut shell:
- Find out who owes the estate money, and to whom the estate is in debt to.
- Create a detailed list of the money, property, and possessions in the estate.
- Value these assets in monetary terms, with help from a professional valuer.
- Calculate the amount of inheritance tax (if any) due to UK government.
- Settle any debts of the estate, including the amount of any inheritance tax due.
- Distribute the remaining assets in terms of the will, or close relatives as applies.
These are the broad stages of managing property in a deceased estate. You may require assistance from professionals if you are unfamiliar with these matters.
Informing the Government About the Death
The deceased may owe the government money in terms of tax and national insurance. Although they may also be due some outstanding benefits. You therefore need to inform the relevant departments, in your role as administrator or executor.
The deceased’s spouse or partner may be due continuation benefits, so do remember to ask. They may have to rely on this income until the estate is wound up.
Managing Inheritance Tax for a Deceased Estate
Inheritance tax is a levy on the value of the fixed property, money, and possessions in a deceased estate. An executor or administrator of such an estate in the UK, must inform the HMRC tax office of the death.
The headline tax rate is 40%, but there are several exemptions that may bring this rate down:
- There is normally no tax due, if the total value of the estate is below £325,000.
- Any amount above that threshold may be tax free, depending on who is the heir.
- Qualifying heirs include a spouse, civil partner, charity or community amateur sports club.
However, the estate must still be valued and reported to HMRC, even if there is no inheritance tax due. There is one more possible exemption to consider when managing property in a deceased estate…
If the person who died owned their home (or had a share in it), then an additional £175,000 might be tax free too. However, this only applies if the total value of the estate is less than £2 million, AND the home passes to one or more of their children or grandchildren.
Paying Inheritance Tax in a Deceased Estate
The UK Government does not issue grants of probate or letters of administration, until it knows the inheritance tax implications. This is based on the collective value of the fixed property, financial assets, and other possessions the deceased owned.
The HMRC expects to see the full amount of inheritance tax settled by the end of six months after the deceased died. If this is impractical and there is no other way out, then the executor or administrator should negotiate a payment plan.
However, the HMRC holds the strong cards when it comes to negotiations. This is because the administrator or executor may not distribute the assets to the heirs, until all the debts are settled first. It may become necessary to sell some assets out of hand to resolve this impasse.
Value the Assets Carefully Before Selling
Deceased estates are popular targets for bargain hunters, because many executors and administrators are keen to move on. The heirs, on the other hand, may want to squeeze every ounce of value from their inheritance. While the HMRC office expects a fair value.
Avery Associates has a panel of professional valuers, for whom assessing the value of fixed property, and valuable possessions, has become their way of life. Their professional fees may be far lower than you expect. There is only way to find out, and that is to give Avery Associates a call.
More Information
How UK Inheritance Tax Works on Property
Fixtures Chattels and Commercial Leases in UK
Jeff is reliable, extremely knowledgeable and personable. I know to instruct Jeff to assist me with probate valuations for my clients, and when I’m acting as an Executor to an estate. … Jeff also provides probate property valuations for the HMRC making you feel very looked after. Ella Millett.
