VALUATION Death wish
Getting the valuation right for probate can be delicate, says Geoffrey Milnes.
P
roperty valuations are a common part of calculating an estate’s value after death, but dealing with the taxman can have its pitfalls. Chartered surveyor and RICS registered valuer Geoff Milnes has some advice for those faced with administering an estate after death. Dealing with a death in the family is not just an
emotional issue – it often has significant financial implications for those left behind. Family members or close friends may be left with the task of sorting out the will and estate of the deceased. For those who aren’t particularly financially savvy – which includes many of us – it can be a difficult task to ensure that the beneficiaries are properly and fairly dealt with whilst keeping payments made to HM Revenue and Customs to a minimum, but within the law.
KEEPING COSTS DOWN There is often an understandable temptation for executors of wills and their advisors to keep costs to a minimum, thereby ensuring the maximum amount possible is left for distribution to the beneficiaries. This is especially true when it comes to the valuation of property, which frequently forms a significant, if not majority, share of the estate. In the interests of simplicity and reducing costs, the advice will often be to ‘get a couple of estate agents round to give a valuation’. The figures from these valuations will then be used as a basis for filling in the probate forms.
GETTING THE RIGHT FIGURES This may sound like the logical solution: as the experts in their field, estate agents are best placed to know the current market value of a property, but there is significant flaw in the process which may cause problems further down the line. Estate agents provide marketing appraisals, not valuations, and their role is to sell the house rather than satisfy the legal requirements of the probate courts and the taxman. This means that the figures used for probate may not always be satisfactory for taxation purposes. It appears that HMRC is getting wise to this discrepancy. Last
year they launched over 9000 investigations into property valuations of deceased estates. The result was around £70 million raised for the public purse – but at the expense of individuals who thought that they were doing the right thing.
TAKING REASONABLE CARE If the valuation is incorrect and produced without ‘reasonable care’ the estate and its beneficiaries could be fined up to 100 per cent of the additional tax liability, as well as having to pay the tax itself – an expensive mistake. This could also leave the executors open to challenge by the beneficiaries. According to HMRC, reasonable care in obtaining the valuation
includes seeking professional advice from a qualified independent valuer, making the valuer aware of any particular features of the property which could affect the final figure (development potential,
36 SEPTEMBER 2011 PROPERTYdrum
HMRC investigations last year into values of deceased estates raised £70m.
existing tenancies, third party possessory rights, etc.) and questioning anything unusual about the valuation.
SEEK ADVICE FROM THE PROFESSIONALS The HMRC states on its website that they ‘strongly recommend that you use a professional valuer because they will make sure the valuation is as accurate as possible. You will have to pay their fees, but you may be able to claim them back from the estate later’. In addition, a number of valuers who are allied to estate agents will discount the cost of the inheritance tax valuation from any eventual sales commission if you use their estate agency services. The message from HMRC is clear – sellers need to use a
professionally qualified valuer to give the correct valuation, not simply a market appraisal. Whilst a lower than expected valuation might seem a blessing, it could actually cause significant problems in the future in the form of fines and larger tax bills. Whilst it can be tempting to cut corners, save costs and obtain
a less than realistic valuation, as with most things in life it pays to follow the rules in the long term. Two of life’s more unpleasant certainties are death and taxes. Whilst the first is largely beyond our control, with the proper advice we can do our best to keep the second to a minimum – and stay on the right side of the taxman.
Geoffrey Milnes BSc. FRICS, Dip HI has over 30 years’ experience as a specialist residential surveyor and valuer. Formerly Associate Director with Countrywide Surveyors, Geoff now works in the Professional Services team at Andrew Granger & Co (
www.andrewgranger.co.uk).
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