Obtaining property probate valuation
Discussion
My father died about 10 days ago, and I'm starting to sort out his estate.
There are two properties: the house he lived in, and my grandmother's bungalow.
Taking the two properties together with investments that Dad had, he might be knocking on the door of the £650k combined IHT threshold (my Mum died about 5 years ago). The property valuations will be a key factor in determining whether he busts the threshold.
So, if I understand correctly one of the first things to do is to value the estate for IHT purposes, before probate can be granted. This will mean getting a valuation of both properties.
Is it simply a case of phoning up estate agents and getting them to come round and put a figure on them? Presumably I need to tell the agents the purpose of the valuation. Should I get more than one valuation for each property? I have read in some places that it has to be a surveyor to do the valuation - is that true?
The house Dad was living in is in especially poor state. Desperately in need of modernisation, with appalling seventies decoration throughout. It's also ankle-deep in rubbish - quite literally. It's very sad that Dad was living in such appalling conditions, but he adamantly refused any help. Should the valuations reflect the amount of investment that will be needed to bring the properties up to a marketable standard?
Many thanks for any help you can offer.
There are two properties: the house he lived in, and my grandmother's bungalow.
Taking the two properties together with investments that Dad had, he might be knocking on the door of the £650k combined IHT threshold (my Mum died about 5 years ago). The property valuations will be a key factor in determining whether he busts the threshold.
So, if I understand correctly one of the first things to do is to value the estate for IHT purposes, before probate can be granted. This will mean getting a valuation of both properties.
Is it simply a case of phoning up estate agents and getting them to come round and put a figure on them? Presumably I need to tell the agents the purpose of the valuation. Should I get more than one valuation for each property? I have read in some places that it has to be a surveyor to do the valuation - is that true?
The house Dad was living in is in especially poor state. Desperately in need of modernisation, with appalling seventies decoration throughout. It's also ankle-deep in rubbish - quite literally. It's very sad that Dad was living in such appalling conditions, but he adamantly refused any help. Should the valuations reflect the amount of investment that will be needed to bring the properties up to a marketable standard?
Many thanks for any help you can offer.
Get a friendly estate agent to value it, tell them upfront it is a probate valuation, quietly explain your reasoning for keeping the valuation low. Give them the 'carrot' that they will be first in line when you do eventually sell.
It's worth checking on Zopla or similar to check local prices and see what valuation they give, you don't want to be too far out!
It's worth checking on Zopla or similar to check local prices and see what valuation they give, you don't want to be too far out!
I just had two estate agents give me a valuation, used an average of the two and compared it to recently sold similar properties in the area, my view was that I could back up with details my decision, unsure what I would have done if it was near the threshold, perhaps mention it to the agents and take it from there, this would be my first step as it's free.
Sorry for your loss not a good time to be working through this, I have done it 4 times and help a few friends, it's is pretty straight forward, it just takes time.
Sorry for your loss not a good time to be working through this, I have done it 4 times and help a few friends, it's is pretty straight forward, it just takes time.
I hadn't even thought about CGT.
If I understand correctly, you're not subject to CGT on your primary residence. Correct?
If that's so, then Dad (and hence his estate) is not subject to CGT on at least his own house. Granny's bungalow may be a different matter.
I would have thought that selling his main house merely liquidates the asset within his estate (because it's the executors, not the beneficiaries, doing the selling), and therefore it's not subject to CGT. When the beneficiaries receive the proceeds, they're not receiving the property - so surely there's no CGT to pay by them, only IHT. But of course that may be wrong.
If I understand correctly, you're not subject to CGT on your primary residence. Correct?
If that's so, then Dad (and hence his estate) is not subject to CGT on at least his own house. Granny's bungalow may be a different matter.
I would have thought that selling his main house merely liquidates the asset within his estate (because it's the executors, not the beneficiaries, doing the selling), and therefore it's not subject to CGT. When the beneficiaries receive the proceeds, they're not receiving the property - so surely there's no CGT to pay by them, only IHT. But of course that may be wrong.
From this page:
Money Advice Service said:
Is there Capital Gains Tax to pay on the estate?
The good news is that the estate doesn’t have to pay any Capital Gains Tax on the property or assets that weren’t sold (also known as ‘unrealised gains’) before the person died.
But, if the property or asset is sold during probate and its value rose since the person died, there is usually Capital Gains Tax to pay. This tax is calculated on how much the increase is since the person’s death.
Beneficiaries inherit the assets at their probate value. This means that when they sell or give the asset away, they will pay Capital Gains Tax on the increase in value from when the person died to when it was sold or given away.
It is, I think, our plan to sell the properties during probate - so there should only be CGT to pay if it takes absolutely ages to sell, or possibly if the property gains value due to improvements that we make to it.The good news is that the estate doesn’t have to pay any Capital Gains Tax on the property or assets that weren’t sold (also known as ‘unrealised gains’) before the person died.
But, if the property or asset is sold during probate and its value rose since the person died, there is usually Capital Gains Tax to pay. This tax is calculated on how much the increase is since the person’s death.
Beneficiaries inherit the assets at their probate value. This means that when they sell or give the asset away, they will pay Capital Gains Tax on the increase in value from when the person died to when it was sold or given away.
Edited by Dr Mike Oxgreen on Monday 16th January 11:23
On the subject of CGT for my Granny's bungalow, I know that Dad persuaded her to hand it over to him during her lifetime as an IHT dodge. I think we found the Deed of Gift for when that happened, so we should know the date. Obviously the bungalow wasn't Dad's primary residence, so I assume that Dad's estate would be liable to CGT on any gain in value of the bungalow from that date - is that correct?
Can we ask the surveyor to also estimate the bungalow's value on that date for CGT calculation?
Can we ask the surveyor to also estimate the bungalow's value on that date for CGT calculation?
The probate valuation is necessary to obtain probate and to assess the initial total IHT liability, if any. Once you have probate as executor you will need to dispose of the estate assets which will include the house. If total assets have increased in value there will be a balance of IHT to pay, or maybe a rebate if the total assets when realised are less than the probate valuation.
As said before, as far as the house is concerned, it's really straightforward, as long as the house is sold. If the ownership is transferred to, say, a family member then there's several potential complications and maybe you'll need legal advice.
R.
As said before, as far as the house is concerned, it's really straightforward, as long as the house is sold. If the ownership is transferred to, say, a family member then there's several potential complications and maybe you'll need legal advice.
R.
Dr Mike Oxgreen said:
Can we ask the surveyor to also estimate the bungalow's value on that date for CGT calculation?
Isn't there a risk that your capital gain in this instance is equal the total sale value of the property given that the initial consideration for the property was zero (i.e. it was a gift)?I think CGT was mentioned because if you get a low probate valuation and then when (presumably) the houses are inherited and perhaps subsequently sold any 'increase' in value will be liable for CGT by those who inherited them.
So you need to balance less IHT against more CGT or vice-versa.
So you need to balance less IHT against more CGT or vice-versa.
megaphone said:
OP. Read the page you linked to again. No CGT is payable on a deceased persons estate.
Have you read this bit...Money Advice Service said:
But, if the property or asset is sold during probate and its value rose since the person died, there is usually Capital Gains Tax to pay. This tax is calculated on how much the increase is since the person’s death.
So if the property is valued at 'x' when the person dies, and then sells during probate for 'x+y', there would be CGT to pay on 'y'. It's maybe slightly unlikely, because you'd kinda hope the property would sell quickly enough that the value wouldn't change.uknick said:
Where did granny live after gifting the property to your father? Is she still alive?
If she is deceased, was her estate liable to IHT if it included the value of the house?
She continued to live in the bungalow after gifting it to Dad. This was presumably because they were hoping she'd live at least 7 years more and hence avoid IHT. She is now dead (died in 2001), and I think she did indeed survive 7 years after the Deed of Gift. I actually think it's rather unlikely that her estate would have been subject to IHT even including the bungalow, so the gift was probably unnecessary, but I'm not sure. Even at today's prices the bungalow is only worth maybe £150k on a good day.If she is deceased, was her estate liable to IHT if it included the value of the house?
Oh dear. It seems my Dad thought he knew what he was doing, but he was wrong.
I've just found the Deed of Gift for the transfer of the bungalow from my Granny to Dad, and it's dated 1989. Presumably the whole point of this was to try and avoid IHT, hoping that Granny would survive at least 7 years after the Gift (which she did).
But... I've also found a letter from his solicitors in 2001 a few weeks after Granny's death, containing the following:
1) The gift was totally unnecessary, because it was highly unlikely Granny was likely to bust the IHT threshold, and
2) Even if there were a danger of paying IHT, the gift did f
k-all because the value of the bungalow was included in Granny's estate for IHT purposes anyway!
I've just found the Deed of Gift for the transfer of the bungalow from my Granny to Dad, and it's dated 1989. Presumably the whole point of this was to try and avoid IHT, hoping that Granny would survive at least 7 years after the Gift (which she did).
But... I've also found a letter from his solicitors in 2001 a few weeks after Granny's death, containing the following:
Dad's solicitor said:
... we understand that notwithstanding the gift to you, your mother continued to live in the property rent free. For IHT purposes this type of arrangement is called a "gift with reservation". The effect of this is that your mother's estate will be considered, for IHT purposes only, to own the full benefit of the asset at the date of death.
We understand, following our recent telephone conversation, that you consider the property has a value in the region of £75,000. In the circumstances therefore, when adding this to the value of the other assets in the estate, there is no question of the overall value exceeding the IHT threshold at the date of your mother's death which was £242,000.
So...We understand, following our recent telephone conversation, that you consider the property has a value in the region of £75,000. In the circumstances therefore, when adding this to the value of the other assets in the estate, there is no question of the overall value exceeding the IHT threshold at the date of your mother's death which was £242,000.
1) The gift was totally unnecessary, because it was highly unlikely Granny was likely to bust the IHT threshold, and
2) Even if there were a danger of paying IHT, the gift did f
k-all because the value of the bungalow was included in Granny's estate for IHT purposes anyway!Gassing Station | Finance | Top of Page | What's New | My Stuff