Dealing with a bereavement means handling many things, not the least of which is disposing of the deceased’s property according to their Will. However, before any of the estate can be inherited, a valuation of the property of the deceased needs to be established and any inheritance tax liability paid in full.
The deceased’s property is probably the most valuable part of their estate, and it is also the part most susceptible to rapid changes in value. No wonder therefore that most probate headaches involve establishing an accurate market value for the property, as it stood at the time of death. Valuing an estate for probate involves many different tasks as well as specialised knowledge. No thorough valuation of the property can occur without understanding aspects like gross and net internal and external areas of a building and the features of a property.
The laws surrounding property valuation are intricate. This leaves a lot of room for mistakes if you are planning on doing a property valuation yourself and you do not possess the knowledge to carry it out. Any mistakes made during a property valuation can end up costing you dearly.
The implications of an inaccurate valuation of the property
An accurate probate valuation is one of the most important roles of a will’s executor. Sometimes, an executor will try and avoid the additional costs of hiring an agent to carry out the valuation. However, doing this can often lead to a property and its contents being undervalued, which can be very bad news for an executor.
Recently, HMRC has increased the number and frequency of investigations into various estates. These investigations resulted in millions of additional pounds being added to their coffers from corrected valuations. Included in this figure are the numerous fines which were levied as the result of under-valuations.
How severe can the fines for undervaluation be? They are proportionate to the amount undervalued. In other words, if an estate was undervalued by £20,000, an additional £8,000 would be charged in tax. In addition to that, HMRC would add a penalty of 30% to the amount of additional tax charged. The grand total? A whopping £ 10,400, payable to HMRC within six months of the valuation being completed.
At the end of the day, the question should be whether it’s worth the risk to value a loved one’s estate yourself if you have no experience.
What is the next Step?
If you have no experience with property valuations, the best advice is to seek the advice of a probate specialist. This will show HMRC that you took reasonable care to ensure a valuation that was both accurate and true. This page contains information and resources that can help you obtain a thorough and proper valuation of your loved one’s estate.
If you need further assistance, our team at Avery has the needed experience. For more information about the many services we offer, call Jeff Avery on 0800 567 7769.