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What is a probate valuation and why do I need it?

Written by: David Cran on Thursday 26/05/2016

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As of 1st June 2016, all business and commercial valuations will be serviced under the trading name of Eddisons Taylors.

The Government’s recent changes to the inheritance tax thresholds have highlighted the importance of having an accurate valuation for probate. We take a look at the issue of probate valuations and explain why accuracy is so important.

What is a probate valuation?

Benjamin Franklin once said, “In this world nothing can be said to be certain, except death and taxes.” And while we can’t be certain what happens in the afterlife, we can try to minimise the amount the government takes from our descendents after we pass away.

Probate is the legal process of dealing with someone’s assets after they die – this is usually conducted by the executors who carry out the wishes of the deceased person, as stipulated in the will. A Grant of Representation allows the executor to gain access to all the information they need to establish the value of the deceased’s assets. These can include money in bank accounts, stocks and shares, vehicles, jewellery, works of art, and probably the largest asset anyone will hold, property.

A probate valuation takes into account all these items and deducts any outstanding debts to calculate how much inheritance tax (IHT) is owed. Currently, assets totalling up to £325,000 are classed as being in the nil rate band for IHT. Assets above that figure are taxed at 40 per cent.

In some instances, up to 100 per cent of IHT can be mitigated on business assets when they are transferred. However, this is an extremely complex area and excludes, for example, land, buildings and machinery unless owned by a trust whose beneficiary has a life interest in such a trust. Specialist advice must be sought in such instances.

Why it is so important

Probate, inheritance tax and capital gains are inextricably bound up with each other, particularly in respect to commercial property, which with a total value of £787 billion represents 13 percent of the total value of buildings in the UK – a figure which the Chancellor of the Exchequer would like a large slice of.

Establishing the accurate value of an estate is essential if IHT is to be minimised and it’s vital that you seek independent, professional advice about what any commercial property which makes up an estate is valued at. The Inland Revenue is particularly vigilant about valuations which fall significantly below or above market value and will instigate investigations to recoup any money and possibly stipulate higher tax liabilities if potential fraud is suspected.

A valuation by an estate agent, for example, is not sufficient for the purposes of probate, therefore, all valuations must be carried out by a qualified and experienced RICS surveyor who has knowledge of the local market and the authority to provide a compliant report. It’s vital that the executor of the will understands these legal and financial obligations and acts in accordance with the law.

If you need any assistance with the process of probate, including a valuation on a commercial property, or advice on being an executor, contact the Eddisons team. Our experienced and highly-trained staff includes RICS surveyors who can offer you up-to-date advice on valuations as well as other matters relating to commercial property.

Written by: David Cran on Thursday 26/05/2016

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