Seeking professional advice for probate – understanding valuations and tax liabilities

Irrespective of how straightforward an estate may seem, using inheritance tax solicitors in London can prevent you from unnecessarily losing more money in the long-term. This post elaborates on some of the typical questions asked by clients seeking professional probate advice while exploring the probate valuation process more.

The system allows for a layperson to handle such matters themselves, without using any solicitors to manage things on their behalf. However, although an individual can get through the process relatively smoothly, we frequently, as North London Solicitors, are called upon to pick up the pieces. This process can be sectioned into three-stages:

Stage 1 – Valuation

The initial stage involves ascertaining the value of any assets and liabilities. While this sounds relatively simple, if you are dealing with jointly held properties or company shares, there are many things that the law will allow you to do when valuing such items. From an inheritance tax perspective, the difference between getting the valuation correct vs. getting it somewhere near to where you believe it should be, could be substantial.

Getting things right from the beginning and having the correct valuation could potentially save you more than the cost of taking professional probate advice in the first place.

Stage 2 – Tax Return

The complexities of the tax return, and by having a comprehensive understanding of what the rules allow you to do or not, can end up with a client seeing sizeable savings here. As trusted Finchley probate solicitors, we are experts in knowing the right way to structure these returns for the best possible outcome.

When handling all aspects of this for a client, we can ensure the valuation and tax returns are completed correctly and with the right information. This saves our clients both time and money.

Stage 3 – Court Application

Following an application to the court, or for a will, it would be after a grant of probate; that the court could potentially revert back with questions. These questions must be answered correctly and, in a time-efficient manner. If tax is applicable, then you must be able to show that any tax has been paid. Additionally, it’s imperative to know the correct period you have to pay the tax.

Many people aren’t aware that certain assets lend themselves to having tax paid over a 10-year-period instead of straight away. This knowledge alone can save a significant amount of stress and alleviative the immediate need to source those funds.  

In Conclusion

When people seek out help with probate-related matters, understanding valuations and tax liabilities can make a critical difference to the process and outcome. There are specific situations, particularly with tax allowances and the residential nil rate band; the rules around which are highly complex; particularly if someone’s moved out of the property or they downsize a property that may still allow you to claim those rules.

While people often believe that seeking professional probate advice from any North London solicitor will cost money; it may help clients save money while alleviating much time and stress in the process

Probate Valuation FAQs

What does a probate valuation mean? Probate valuation is a system that helps to establish the value of a person’s assets should they die.

How long should probate take? In the U.K, the average time probate takes may vary between 1-9 months. The complexity of the estate, its size, and the volume of applications to the local probate office can impact the processing time.

What is the difference between a probate valuation and a market valuation? Market value is usually a broad estimate obtained by looking at sales of other similar properties. In contrast, the probate valuation is obtained so that HMRC will accept it to establish the amount of inheritance tax that is due to be paid.

What happens if the sale price is higher than the Probate value? If a property sells shortly after probate is granted, and the final selling price is more than the value submitted for probate; then HMRC could either substitute the sale price and recalculate the Inheritance Tax Liability, or they may look at the increase as a gain, meaning that Capital Gains Tax becomes payable.

What happens if the sale price is lower than the Probate value? Where a sale price is below the figure provided for probate, and the property is sold within four years of the date of death, a claim with HMRC could give you a refund for overpaying inheritance tax.

If you would like to arrange a consultation or have questions about probate advice, please email me or speak with a team member directly on (0)20 8349 5500.

Government announces temporary changes to identity verification and signing deeds

The Government has announced that from 4 May it will temporarily introduce new methods for verifying a person’s identity and for signing deeds in response to the COVID-19 pandemic.

Under the new rules, in addition to conveyancers and chartered legal executives, verification can now be undertaken by people who work, or have worked, in certain professions including:

  • retired conveyancers, chartered legal executives, solicitors and barristers 
  • bank officials and regulated financial advisers
  • medical doctors, dentists and veterinary surgeons
  • chartered and certified accountants
  • police officers and officers in the UK armed forces
  • teachers and college and university teaching staff
  • Members of Parliament and Welsh Assembly members
  • UK civil servants of senior executive officer (SEO) grade or above
  • Magistrates.

To assist with social distancing measures and the official ‘Stay at Home’ guidance, verification can now be done via a video call. 

The rules change, will also allow the Land Registry to accept deeds that have signed using the “Mercury signing approach’.

For land registration purposes, this means that a signature page will need to be signed in pen and witnessed in person, although not via a video call, and can be captured using a scanner or camera to produce a PDF, JPG or suitable copy of a signed signature page.

It is hoped that the changes will help property transactions progress more smoothly within the rules of the current lockdown.

If you require assistance with a property transaction under these unique circumstances, why not speak to our property team today

Fraud risk the main obstacle to coronavirus Wills reform

The Government has indicated that it is considering reforms to probate legislation to accommodate the challenges of the coronavirus outbreak, but has cautioned against any move to suspend the requirement for two independent witnesses, owing to the fraud risk.

Justice Minister, Alex Chalk, responded to a Written Question in Parliament, saying: “The Government is currently reviewing the case for reform of the law on making Wills given current circumstances.

“The constraints of the COVID-19 situation must be balanced against the important safeguards in the law to protect elderly and vulnerable people, in particular against undue influence and fraud. Having two independent witnesses provides safeguards to those making Wills.”

He went on to reject the idea of allowing privileged wills, which can be made on active military service, saying that those circumstances do not equate to the coronavirus crisis.

However, he added: “The Government is committed to considering further work on witnessing documents by video-conference generally, in the light of the recent Law Commission report on Electronic Execution of Documents, which will help inform potential reforms to the law on Wills in the future.”