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Where Taxpayers and Advisers Meet

Significance of probate valuation of house left to spouse?

TaxLobster
Posts:13
Joined:Wed Jan 27, 2010 12:02 am
Significance of probate valuation of house left to spouse?

Postby TaxLobster » Sat Jan 21, 2017 6:23 pm

If a married couple own their home as joint tenants, and the wife dies leaving her entire estate to their surviving spouse, what is the significance of the probate valuation of the house? Clearly there is no immediate IHT burden on the husband, even if the wife's assets are over the nil-rate band.

When the husband eventually dies, which hopefully will not be for 20 or 30 years yet, and leaves his estate to the couple's children, then the house (or whatever property he is living in at the time) will be valued then, and will count for IHT due before the children get their bequests (his total estate estate will be more than twice the nil-rate band).

So far so good? What I'm struggling to understand now though, is what does it matter how much the marital home is currently worth... if it's 50K or £500K or £5m, why is it of any interest to HMRC? As the widowed husband in the above scenario, I'm just trying to get my head around how much I need to bother with getting an accurate valuation (it's an unusual property which to be honest will be difficult to value). Even if, say, the husband died even months later, and the actual selling price of the marital home at that point turned out to be wildly and embarrassingly different to the previous probate valuation after the wife died - so what?

Thanks for any clarification here!

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Significance of probate valuation of house left to spouse?

Postby maths » Sat Jan 21, 2017 9:51 pm

In principle an accurate valuation for probate purposes on your facts is not necessary. As you rightly point out nothing of significance hinges on such a figure.

Probate fees are currently levied on a flat rate (although proposals to base such fees on the value of the deceased's estate would require accurate valuations).

On the surviving spouse's death two nil rate bands and two residence nil rate bands will apply re any IHT charge.

The major aspect re a valuation of the property on the first death is re CGT. Should the property be disposed of at some point in the future (eg a sale; gift; settlement into trust etc) and a CGT charge was to arise it would be helpful to have previously obtained a contemporaneous valuation.

TaxLobster
Posts:13
Joined:Wed Jan 27, 2010 12:02 am

Re: Significance of probate valuation of house left to spouse?

Postby TaxLobster » Sun Jan 22, 2017 8:19 pm

Thank you very much maths.
Should the property be disposed of at some point in the future (eg a sale; gift; settlement into trust etc) and a CGT charge was to arise it would be helpful to have previously obtained a contemporaneous valuation.
Why, though? Any taxable increase in value will surely be determined by the value at the point of sale versus the value at the date it became chargeable (ie, most probably the date when my heirs acquired it)?

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Significance of probate valuation of house left to spouse?

Postby maths » Sun Jan 22, 2017 11:03 pm

Retrospective property valuations are often difficult to obtain and give HMRC more ammunition to challenge any such valuation.

housesinsale
Posts:1
Joined:Thu Aug 31, 2017 11:25 am
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Re: Significance of probate valuation of house left to spouse?

Postby housesinsale » Thu Aug 31, 2017 11:30 am

In principle an accurate valuation for probate purposes on your facts is not necessary.


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