The UK Government wants its slice of the cake, if any on offer before creditors and inheritors stake their claim. This presents the obvious temptation to keep property value low, although no wise executor would attempt that! Today we debate the wisdom of probate valuations by RICS authorised surveyors, and why it is a smart idea to have them done.
Probate Valuations by RICS Have Credibility
An estate worth a tad less than the Inheritance Tax threshold of £325,000, is almost destined to raise a few eyebrows at His Majesty’s Revenue and Collection Service HMRC. Probate is sometimes a game of cat and mouse between HMRC clerks and aspirant property owners, salivating at the thought of inheriting the family estate.
However, this is not the right time to take chances with the rules. Especially if you are an executor who could get caught in the middle, if you signed off the HMRC submission and it contained significant errors in the estate’s favour. This is where probate valuations by RICS surveyors add real value.
The process to determine whether Inheritance Tax is due includes the following key stages:
- Advertise the estate, including in The Gazette to track down all the debtors owed money by the deceased estate.
- Determine the value of the property and the chattels for probate. Sum them up to determine the GROSS value of the estate.
- Set that one value off against the other to determine the GROSS value of the estate for Inheritance Tax purposes.
- Now deduct the value of any assets bequeathed to spouses, civil partners, charities, or prescribed, tax-free assets.
- Finally, set value 3 off against value 4 to establish the NET value of the estate for purposes of calculating Inheritance Tax.
How to Calculate the Amount of Inheritance Tax
First, determine how much of the Inheritance Tax threshold is available by (a) adding any available basic tax threshold to the £325,000, and (b) deducting the net value of any gifts made during the preceding seven years.
Then add in any residence nil rate band, plus anything transferred from a late spouse or civil partner, to get to the available threshold. Finally, compare this ‘chargeable value’ to the available threshold you calculated to determine if any Inheritance Tax is due.
Back to Our RICS Probate Valuations Topic
Property valuation in England follows a formal process to determine what a property might sell for under open market conditions. This typically means as if the seller were not under pressure, and the purchaser acted rationally. However, if the property were already sold out of the estate, then the value is the gross price it fetched.
The net value of an estate also determines whether any probate fee is due. If the deceased estate includes a property, then this should be the case, unless it passes to the married partner or legal spouse. This is a further reason why it is logical to determine the net value of the estate as soon as practical.
Red Book probate valuations by RICS surveyors in good standing are most likely to ensure an accurate reflection of market value, and may allow the assets to distribute to the heirs sooner than later. These considerations are especially important where the primary heir is in tricky financial straits.
HMRC More Likely to Accept RICS Values
HM Revenue and Customs is aware of the hoops surveyors must navigate, to earn their coveted Red Book qualification. And no wonder, because the process they follow is so thorough and detailed it is seldom open to challenges. Compare this to the ‘hit and miss’ process some estate agents follow.
This is because estate agents may come under pressure from buyers, sellers, and their own imperative to close sales and earn commission. Therefore, any probate valuation they provide could carry no guarantee that they followed a logical process. These problems might compound if the subject property is unusual, atypical or rare.
The Case For RICS Probate Valuations
The Royal Institution of Chartered Surveyors (RICS) is an international body that founded in London in 1868. It operates at an inter-governmental level, where it promotes enforcement of highest valuation standards. These standards include valuation, management and development of land, real estate, construction and infrastructure.
Membership standards are high, and include opportunities for specialism in a variety of fields. RICS currently has some 135,000 members in over 150 countries. Avery Associates offers a RICS valuation as part of their portfolio relating to the administration of deceased estates in England.
A Recent Avery Associates Review
This truly is a ‘one stop shop’ for all things relating to Probate valuations and clearance … Jeffrey valued the contents and arranged a RICS Surveyor to carry out a ‘Red Book’ valuation … I warmly recommend them. J Schon
