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.

Children challenge rock star’s will

The children of Johnny Hallyday, the French rock star who died aged 74 in December 2017 from lung cancer, are to challenge his will in the French courts.

Actress, Laura Smet and her half-brother David Hallyday are contesting their rock star father’s will after finding that he had left his estate to Laeticia, his fourth wife, and the couple’s adopted daughters.

Smet, 34, said in a statement that she was “stupefied and hurt”.

Lawyers for Smet argue that the California-drafted will is in contravention of French laws preventing the disinheritance of children.

Ian Pearl, a Partner in the Dispute Resolution team at OGR Stock Denton LLP, said: “This case is interesting because it raises the issue of inheritance where there are, as is increasingly common, complex family relationships. It also raises the subject of cross-border issues in probate.

“While this particular dispute will be settled by the French courts, similar scenarios regularly play out in the UK.

“Where someone dies domiciled in England and Wales, the Deceased’s children, along with various other categories of people associated with the deceased, are entitled to bring a claim under the Inheritance (Provision for Family & Dependants) Act 1975. This Act, gives the Court power to make orders in favour of a claimant, when it finds that the will failed to make “reasonable financial provision” for them.”

The case law on what is “reasonable financial provision” is long and tortuous. The case of Ilott –v- Mitson (an adult child being disinherited by her mother in favour of charities) went all the way to the Supreme Court. Since then there have been further cases involving both dissatisfied spouses and children.

The case law shows that each dispute is highly fact sensitive. One thing that is very important is that potential claimants should seek advice early because under the Act claims must be brought within six months from the date of the grant of probate.

More information on contentious probate is available here.