How to Get a House and Contents Valued for Probate?

The duty will fall to the Executors (or Administrators, if the deceased is intestate) to apply for probate, and they must provide a detailed list of all assets, liabilities, and gifts made in the last 7 years, to the HMRC. In turn, the HMRC will expect a full enquiry into the financial affairs to be carried out by the Executors.

Early on during probate – the process of dissolving the deceased's Estate – it is necessary to value the Estate, especially for Inheritance Tax Purposes. Valuing the house and contents can be a daunting task, but it is an essential part of the process. We will look at how to approach this unenviable task as painlessly as possible.

Valuing a House and Contents

During the administration of the Estate, the Executors need to keep an eagle eye on how much money moves in and out of the Estate to accurately settle debts, provide for beneficiaries, and calculate Inheritance Tax, if applicable. This value needs to include the house and its content at the current, realistic selling price. It is no small feat, but if the Executors follow the correct procedures, they limit the risk of HM Revenue and Customs to dispute the valuations and hold up the entire process.

The Executors or Administrators will have to submit one of two forms with their calculations, depending on the size of the Estate; either an IHT 205 or an IHT 400, which is lengthier.

Getting a Property Valuation for Probate

The house value is considered at the open market value or OMV. As suggested, it means the property is valued at what it could reasonably be sold for at the time of the deceased's passing.

Before the property value is calculated, a few things should be taken into consideration that could affect the worth. Development opportunities, repairs required and the value of similar properties in the same area can either boost or decrease the value.

Making an accurate calculation can prove challenging, so Executors should avoid the DIY route at all costs, and bring in the help of professionals. The valuation can be carried out informally through, say, an estate agent, or formally, by a qualified surveyor. The Executor must provide the valuer with a copy of the deeds as well to verify ownership.

Many people assume estate agents are the go-to for a quick valuation, as it is usually free and straightforward. This is only the best route if there is no Inheritance Tax payable, and even then, Executors should get multiple valuations done to calculate the average value. Getting an informal valuation may sound cheaper, but the valuation can be randomly subjected for inspection by the District Valuer Services for verification. If there is any suspicion that the calculations are incorrect, the HMRC could accuse the Executors of negligence, and impose hefty penalties.

What is important, whether the valuation was formal or informal, is for the calculation to be justifiable to the HMRC. In the event where the property was jointly owned, it is common practice to divide the value of the property in half, or by whatever share the property was owned, in order to calculate the true value of the Estate. In addition, it is also helpful to know the true value of the property to determine whether Capital Gains Tax will be payable if the property is sold later on.

Getting a Content Valuation for Probate

Content valuation is trickier than valuing the house itself. Some items might have lost value over time, while on the other hand, seemingly insignificant items could be antique and worth far more than meets the eye. The true value should not be confused with sentiment – a cherished item by the deceased may be worthless in monetary value.

To start, the obvious step is to identify and compile a list of all significant items; cars, furniture, jewellery, heirlooms, china, silverware, art, and so on. Some items of value might have also been stored in a safety deposit box, so it is important to look into that as well. Once the list is complete, it should be cross-referenced with the Will to ensure that everything is accounted for, before commencing with the valuation. It is also worthwhile to take photos of all items to keep a record for the HMRC.

There are numerous ways to value the content, and the internet is the best place to start to research the value of similar items, say, a second-hand car. The insurance policy will also be able to paint a relatively accurate picture of the household content, but it is important to keep in mind that older items (except for antiques) will be worth less than the insured value.

When in doubt, it is always best to hire a specialist company to do the valuation, at a fee. This can be especially helpful to identify antiques, valuable art, and special collections.

If the content at face value is expected to be below £1,500, a reasonable estimate can be used, and there is no need for a formal valuation. Any other items over the threshold need to be listed separately on the IHT 400 form.

Calculate the Estate for Inheritance Tax

Once the Executors have carried out the valuations, it needs to be determined whether or not the Estate is liable for Inheritance Tax. The calculation needs to be done at the gross value of the Estate to include assets and gifts of substantial value that was gifted in the last 7 years. Currently, the threshold for Inheritance Tax stands at £325 000, and everything over this bracket will be taxed at 40%. There are exemptions, of course, but this is the general Inheritance Tax guideline.