You have to get permission (solicitors call it probate) before you can wind up a deceased estate. The UK government will not provide this permission, until any inheritance tax due is settled. HMRC calculates this duty based on the value of the estate. This post discusses valuing chattels and a house plus financial investments for inheritance tax and probate.
Valuing Chattels and a House Plus Investments
The types of assets you need to value for probate and inheritance tax include everything the deceased owned at their time of death. Broadly speaking these include:
- Fixed property, and improvements on land
- Bank accounts, financial investments and securities
- Contents – all other possessions of the deceased
Assessing Chattels and Other Loose Gear
We have to start somewhere, so let’s begin with chattels. Before we continue, we have to discover the contents first. Valuing chattels and house etc. can be something like a mystery tour. Some of the items may be on loan, or stashed away in a safe repository somewhere, so we need to look. This may be a complex issue in the case of some deceased estates.
- Check with banks and building societies
- Look for receipts for items on loan to others
- Speak to family and friends about recent gifts
- Conduct a detailed search of home and garden
Discovered in a Client Garden © Avery Associates
Some chattels are of particular interest because they are stores of significant value. Keep a careful lookout for old coins, furniture, jewellery, paintings, stamps, silverware, rare vehicles and boats etc. Remember the most surprising objects hold value for specialist collectors! Cross check what you find with special conditions in the deceased’s will.
Valuing Chattels in a House for Probate
Valuing some chattels is dead easy because they change hands in public places. Second hand car values are available in booklets on newsstands. Other items like second hand appliances change hands regularly on platforms like Amazon. Anything worth over £1,500 requires a formal valuation for the inheritance tax submission.
But other items change hands less publicly, with prices withheld from public scrutiny for reasons of buyer and seller confidentiality. Hiring a professional valuator to determine realistic prices, and avoid overstating them helps keep inheritance tax as low as legally possible. Call Avery Associates 0208 640 0044, or 0800 567 7769 for more information and advice.
Dealing with ISA’s, Shares and Pensions
Dealing with ISA’s, shares and pensions is potentially simpler, because their base values are what they were listed when the deceased died. However, financial governing bodies almost inevitably ask for probate, making this tiresome business unavoidable. All of these will need proof of probate plus a death certificate. These are the essential steps you need to follow:
ISA’s and Investments
- Inform each provider and ask them to explain how they deal with deceased estates
- Agree how they are to distribute the holdings after they have sight of probate
Stocks and Shares
The procedure is similar to that for ISA’s and investments. Contact them on receipt of probate to re-register them in the name(s) of the beneficiary(s).
Closing Out with Pensions
- Pensions are in trust, normally tax free and not part of a deceased estate
- They may incorporate death benefits and / or life insurance payouts
- Liaise with providers, provide proof of probate and follow their procedures.
Valuing Land and Improvements
Land and improvements thereon may the most important aspect of valuing chattels, and a house and other assets. That’s because they may hold by far the greatest value, necessitating accurate assessments. There are two broad approaches for determining property values:
INFORMAL VALUES BY ESTATE AGENTS
Many estate agents are willing to conduct free assessments, while others charge relatively low fees. However, these are invariably with an eye on current asking prices. Therefore it is wisest to obtain several, before deciding a likely value.
This approach may work well when the total estate value is satisfactorily below the inheritance tax threshold. However, the tax office may view things differently and decide to investigate further, causing delays.
FORMAL VALUATIONS BY SPECIALISTS
A professional property valuation by a licensed specialist is however far more likely to find favour with an inheritance tax assessor. That’s because these experts are trained to assess all the factors attaching to property valuation. RICS Red Book assessors represent the top echelon of these people. It is far better to be safe than sorry when submitting key information.
Calculating Tax After Valuing Chattels and a House
The actual inheritance tax due depends on the net, not the gross value of the estate. A thorough review helps keep the declaration as low as legally possible. Determine the following:
- All outstanding debts of the estate
- Any spouse, APR and BPR exemptions
- Any gifts made in the 7 years prior to the death
Use this information – plus the nil-rate transferable and residence bands – to calculate the amount of inheritance tax due. Speak to Avery Estates by calling 0208 640 0044 or 0800 567 7769 for independent, verifiable advice.
