VALUING PROPERTY FOR PROBATE IN 2023
HOW TO ESTABLISH WHAT A HOUSE IS WORTH FOR PROBATE AND INHERITANCE TAX
When someone dies, their executor needs to get what’s known as a ‘grant of representation’ or ‘probate’ in order to get the legal right to deal with their estate and pass on their assets as set out in their will. To do this, their entire estate needs to be valued, and this includes establishing how much their home and other property is worth. This is the case even if the beneficiaries are not planning to sell it.
While a property is going through probate, it is likely to be left empty. If this is the case then it needs to be covered by unoccupied property insurance, and it is usually the responsibility of the executors to make sure this is done while probate is carried out.
How is ‘house value’ defined?
House value in a probate context is its open market value, which is what the property might reasonably fetch if it was sold on the open market to a (willing) buyer on the date of transfer. Usually, the transfer date is the day the deceased died, but if he or she gave the property away as a gift within the previous seven years, then it is the date the gift was given. Any peculiarities (such as a buyer desperate to purchase on the property’s street and willing to pay well over the odds) should be ignored.
What’s the best approach for straightforward situations?
If the property is of standard construction and in an area where there are similar properties, HM Revenue and Customs advise you to check advertised prices with local estate agents for houses or flats of the same size and in the same condition. Zoopla and Rightmove can also provide details of recent sale prices locally.
You can also ask estate agents to value the property, and if you take this approach, get two or three valuations and take the average price. The value you submit and any calculations you make must be justifiable should you be asked by the District Valuer.
However, be aware that some estate agents may give you a suggested asking price which is higher than the value for which they would actually expect the property to sell. This would lead to an inflated probate valuation, meaning that the beneficiaries could be liable for more inheritance tax than was necessary. To avoid this, ask the agent to provide an expected selling price as well as an asking price.
When is it worth getting a surveyor’s valuation?
If the property is of non-standard construction, or is the only one of its type in the area, or there have been no recent sales of similar properties in the area so it’s harder to establish the market value, it may be necessary to pay a chartered surveyor for a professional valuation.
Getting a professional valuation may also be the best option if the property is very dilapidated but is on a large plot of land which could be suitable for development.
HMRC are also more likely to accept a valuation provided by a professional.
When can an inherited property be sold?
When you inherit a property, you can only sell it once probate has been granted although it can be put on the market before that time.
Insuring an unoccupied property during probate
When a house is left empty for more than thirty days at a time, be it for probate or any other reason, it can be difficult to get unoccupied home insurance cover.
Once probate has been granted, if the beneficiaries decide to sell the property it will almost certainly need to be cleared before it can be sold. This can be time consuming, so it’s important to ensure that building and contents insurance are in place throughout this period.
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