Property Valuation for Probate

Accurate property valuation is a crucial part of the probate process. This guide explains how to value property correctly for probate and inheritance tax purposes.

Why Property Valuation Matters

Property is often the largest asset in an estate, and its valuation directly impacts:

• Whether inheritance tax is due
• How much inheritance tax is payable
• The distribution of assets among beneficiaries

An incorrect valuation can lead to:

• HMRC investigations and penalties
• Delays in the probate process
• Disputes among beneficiaries

HMRC Requirements

HMRC requires that property is valued at its "open market value" - the price it would fetch if sold on the open market on the date of death. This means:

• The valuation must reflect the property's condition at the date of death
• Any factors affecting value (positive or negative) must be considered
• The valuation must be realistic and defensible

Who Can Value Property

For probate purposes, the appropriate valuer depends on the property's value and complexity:

For Lower-Value Properties

• Estate agents can provide a free market appraisal
• This may be sufficient for straightforward cases where inheritance tax is unlikely to be an issue

For Higher-Value Properties

• A professional RICS (Royal Institution of Chartered Surveyors) surveyor is recommended
• This is essential if the property value is close to or above the inheritance tax threshold
• HMRC is more likely to accept valuations from qualified surveyors

The Valuation Process

1. Initial Assessment

• Determine if the property might push the estate over the inheritance tax threshold
• Consider whether there are any unusual features or complications

2. Selecting Valuers

• For properties likely to incur inheritance tax, obtain at least three independent valuations
• Choose valuers with good knowledge of the local market
• Ensure they understand the valuation is for probate purposes

3. The Inspection

A thorough valuation should include:

• External and internal inspection of the property
• Assessment of the property's condition
• Consideration of location, size, and features
• Comparison with similar recently sold properties

4. Documentation

Keep detailed records of:

• The valuation report
• Comparable properties used in the assessment
• Any factors that influenced the valuation
• Communications with valuers

Special Considerations

Property Improvements

• If improvements were made shortly before death, their impact on value should be assessed
• Keep records of work done and costs incurred

Partial Ownership

• If the deceased owned only a share of the property, only that share is included in the estate
• The value of a share may be discounted compared to its proportion of the whole

Overseas Property

• Property in other countries must also be valued
• Local valuation rules and inheritance tax treaties may apply
• Seek advice from professionals familiar with the relevant jurisdiction

Common Pitfalls

Undervaluation

• HMRC can challenge valuations they believe are too low
• If HMRC successfully challenges a valuation, additional tax plus interest may be due
• In some cases, penalties can be applied

Overvaluation

• Overvaluing property means potentially paying more inheritance tax than necessary
• It can also complicate the sale process if beneficiaries expect unrealistic prices

Delayed Valuation

• Property should be valued as at the date of death
• Significant delays in obtaining valuations can make it difficult to assess the correct value

How Clear Executor Can Help

Our platform can:

• Connect you with qualified property valuers in your area
• Provide guidance on the valuation process
• Help you understand how property valuation affects inheritance tax
• Store and organize valuation documentation securely

Remember that property markets can fluctuate, and the eventual sale price may differ from the probate valuation. What matters for probate is the value at the date of death, not the eventual sale price.