If you are acting as an executor or administrator of a loved one’s estate, one of your first tasks will be to value it. If the deceased owned a house, its likely to be one of the estate’s most valuable assets, so valuing it should be a priority. Executors and administrators are often unsure about the extent of their legal obligations in terms of property valuations, and a question regularly asked of our specialist probate solicitors is, ‘Do I need an official house valuation for probate?’
Here, our probate and estate administration team explains the purpose of property valuations for probate and answers the question ‘Do I need an official house valuation for probate?’
Reach out to Birch & Co’s specialist and supportive team today. Call us on 0191 284 5030 or complete a Free Online Enquiry now to get a bespoke fixed price estimate.
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Why Do I Need To Value A House For Probate?
Executors and administrators need to value each and every asset within the estate, including the deceased’s house, for a number of reasons. They include the following:
• To Make A Probate Application
You can’t apply for a Grant of Probate or Letters of Administration until you know how much the estate is worth, so valuing the deceased’s assets will be one of your first tasks.
• To Calculate Inheritance Tax
Whether the estate is subject to inheritance tax and, if so, how much depends on its value. You have to complete the Inheritance Tax forms before applying for a Grant of Probate or Letters of Administration, and you need to know the value of the estate to complete those forms.
• To Calculate Capital Gains Tax
If you sell property belonging to the estate, you may need to pay capital gains tax. You only pay capital gains tax if the house has increased in value since the owner died or since it was valued for inheritance tax purposes.
Do I Need An Official House Valuation For Probate?
With so much information about house prices on websites such as Zoopla and Right Move, executors and administrators often query whether they really need an official house valuation for probate. The answer is yes – unless the entire estate is passing directly to the deceased’s spouse or civil partner, it’s always best to obtain an official house valuation for probate.
Why Do I Need An Official House Valuation For Probate?
The main reason executors and administrators should obtain an official house valuation for probate is the inheritance tax implications. You are under a legal obligation to take care to provide HMRC with accurate valuations of estate property to ensure you pay the right amount of inheritance tax. HMRC scrutinises property valuations and may impose hefty fines if it transpires that the valuation was too low and not enough tax was paid.
In addition, executors and administrators have far-reaching legal duties when administering an estate. One such duty is to maximise the estate’s value for the benefit of the beneficiaries. If a beneficiary were to claim that you sold the house for less than it is worth in breach of your legal duties, being able to produce an official valuation showing the true value of the property can help you defend such allegations.
How Can I Obtain An Official House Valuation For Probate?
The gold standard in house valuations for probate is known as a ‘Red Book Valuation’. This type of valuation is carried out by an independent valuer who is a member of the Royal Institute of Chartered Surveyors (RICS). The valuer bases their valuation on the method stipulated for the property in question and considers three recently sold properties in the area to come up with an accurate valuation. They then produce a formal report based on their findings.
If HMRC disputes your property valuation, you can refer them to your Red Book Valuation. It’s a belt and braces approach that effectively mitigates the risk of HMRC maintaining that the valuation is too low and imposing fines. On the downside, this type of valuation is the most expensive.
If the estate you’re administering is unlikely to be subject to inheritance tax, a free valuation from a local estate agent may suffice. To give the valuation additional force, it’s best to obtain three separate valuations.
How We Can Help
At Birch & Co our probate and estate administration team has decades of experience in assisting clients with administering estates of all types and sizes. Whether you would like us to take over administration of the entire estate or require advice on a discreet issue such as, ‘Do I need an official house valuation for probate?’, we are on hand to provide the expert support and guidance you need.
Reach out to Birch & Co’s specialist and supportive team today. Call us on 0191 284 5030 or complete a Free Online Enquiry now to get a bespoke fixed price estimate.
“I cannot fault the professionalism and helpfulness throughout what has been a difficult time. I would not hesitate to use your services again and would recommend you to others.” (Mrs Surtees)
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