When a loved one passes away, managing their estate can often seem like a daunting task. One of the key steps in this process is conducting a probate valuation, which ensures that all the deceased’s assets are accurately valued. This helps executors fulfil their legal duties and allows beneficiaries to better understand the estate they are set to inherit.
If you’re involved in managing or inheriting an estate, understanding probate valuation is essential. In this guide, we’ll explore everything you need to understand about probate valuations, including what they include and how they affect the divisions of assets.
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What is probate valuation?
A probate valuation refers to the process of determining the total value of a deceased person’s estate. It includes assessing the value of all assets such as property, personal belongings, and other valuable items. The probate valuation helps to ensure the accurate calculation of inheritance tax and ensures the estate is distributed fairly according to the will or the law of intestacy.
This valuation is essential for securing the Grant of Probate, a legal document that gives executors the authority to manage and distribute the deceased’s assets.
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Who needs a probate valuation?
A probate valuation is needed when an estate includes assets such as property, chattels, or investments. The need for probate valuation typically arises for two key parties:
Executors: Executors are responsible for managing the estate of the deceased. They must ensure that all assets are properly valued to carry out their duties, including paying any taxes due and distributing assets as per the will.
Beneficiaries: Beneficiaries do not conduct the valuation but will benefit from knowing the value of the estate. Understanding the value can help ensure that all inheritance rights are protected and that any disputes about asset distribution can be resolved smoothly.
When is probate valuation needed?
Probate valuation is required when the estate needs to go through probate, which is the legal process of administering the estate. Specifically, it’s needed in the following circumstances:
Property ownership: If the deceased owned real estate, a probate property valuation is necessary to establish its current market value. This helps determine the value of the estate and ensures that the property is included in the inheritance tax calculation.
Personal belongings: Items like jewellery, antiques, cars, and other valuable possessions also require valuation for probate purposes. These assets are known as chattels and must be evaluated to ensure the estate’s full value is accounted for.
Business interests and investments: If the deceased had business interests, stocks, or shares, these too need to be valued as part of the estate.
How probate valuation is carried out
The process of probate valuation involves a professional valuer assessing the estate’s assets. The valuation is typically carried out in the following steps:
- Initial assessment: A professional valuer or surveyor will assess all the assets in the estate, from property to personal belongings, to determine their market value.
- Market comparison: For property, the valuer will compare the estate’s property to similar properties in the area. They’ll consider factors such as location, size, and condition to estimate the property’s current value. For personal items, they will reference recent sales or market prices to value these assets accurately.
- Valuation report: After the valuation, the professional provides a detailed report listing all assets and their values. This report is submitted as part of the probate application to facilitate the legal administration of the estate.
Cost of probate valuation
The cost of probate valuation can vary depending on the complexity of the estate. A straightforward property valuation is typically more affordable, but if the estate includes additional assets like multiple properties or valuable items such as antiques or artwork, the cost may be higher.
It’s important to understand that the professional fee for valuation services is an investment in ensuring the estate is handled correctly and that the distribution process runs smoothly.
Related: How long does a house survey take?
Understanding probate valuations and inheritance tax
One of the key reasons for having a probate valuation is to accurately calculate Inheritance Tax (IHT), which is payable on estates that exceed a certain threshold. As of now, the threshold for IHT is £325,000. If the value of the estate exceeds this amount, the excess is taxed at a rate of 40%.
A probate valuation is crucial to ensure the estate is valued correctly, helping to avoid any errors that could delay the probate process or cause issues for the beneficiaries. It ensures that the right amount of IHT is paid, and that there are no discrepancies that could lead to penalties.
In some cases, there may be additional allowances available, such as the Residence Nil-Rate Band (RNRB), which could increase the threshold if the estate includes a main home passed to direct descendants. This means the actual IHT threshold can be higher in some cases, potentially reducing the amount of tax due.
Getting an accurate valuation is important not only to ensure the right amount of tax is paid, but also to ensure that the estate is managed fairly and smoothly during the probate process.
Probate valuation for different types of assets
Probate valuations are required for various types of assets, each of which may need a different approach:
- Property valuation for probate: A house valuation for probate purposes is typically carried out by a professional valuer or an estate agent. They will assess the property based on current market conditions and comparable property sales in the area.
- Valuing chattels for probate: Chattels, such as jewellery, antiques, or artwork, are often harder to value as their worth can be more subjective. Professional valuers use auction results or market trends to establish fair value for these items.
- Business and investment assets: If the estate includes a business or significant investments, such as stocks or shares, these assets will require specialist valuation. A business valuator or financial expert will assess the current market value of the business or investments.
Related: Tax laws: allowable expenses vs. capital expenditure
Common challenges in probate valuation
Though probate valuation is a relatively straightforward process, there are a few challenges that may arise during the process:
- Disagreements among family members: Sometimes, family members or beneficiaries may have differing views on the value of certain assets, especially when it comes to personal items like antiques or jewellery. In these cases, having a professional valuer can help resolve disagreements.
- Fluctuating property markets: Property values can change over time due to market fluctuations. This can sometimes affect the final valuation, but valuers always base their assessments on current market conditions.
- Specialist valuations for unique assets: Some assets, like rare collections or businesses, require a specialist valuer to ensure an accurate assessment. This may increase costs but is necessary for complex estates.
How to choose a professional for probate valuation
Choosing the right professional to handle the probate valuation is essential. Here’s what to consider:
- Experience and accreditation: Ensure the valuer has experience in probate valuations, particularly for the types of assets involved in the estate. Look for accreditation from reputable professional bodies like the Royal Institution of Chartered Surveyors (RICS).
- Transparent fees: Always check the fees upfront to ensure there are no hidden costs. Professional valuers should provide a clear breakdown of their charges before starting the work.
- References and reputation: It’s always a good idea to ask for references or check reviews from previous clients to ensure the valuer has a good reputation and delivers accurate, reliable results.
Tips for executors and beneficiaries
- Start early: Probate valuations can take time, especially if the estate includes multiple properties or complex assets. Begin the process as soon as possible to ensure there are no delays in the probate process.
- Maintain thorough records: Executors should keep detailed records of the valuation process and any communications with valuers. This helps avoid confusion or disputes later.
- Seek professional advice: If you’re unsure about the process or need guidance, don’t hesitate to seek advice from a solicitor or professional valuer. Their expertise will help ensure that the estate is administered correctly and in line with the law.
Probate valuation plays a crucial role in the estate administration process. By ensuring the value of the estate is correctly established, executors can fulfil their responsibilities, and beneficiaries can be confident that the assets are being distributed fairly.
If you’re navigating the probate process or need help with a property valuation, our team is here to provide expert guidance and ensure everything is handled with care and precision. Get in touch with your local Martin & Co branch today.
