Poorly chicken

[Reikiranf]

Having lost both parents early this year my brother & I have decluttered Mum & Dad's house and put it on the market, the problem is that it appears that the estate agent who valued it for probate undervalued it by about £10k

 

It's still well below the inheritance tax threshold?, so if anyone has any legal or personal experience of this situation could you please tell me if we sold it for a higher price than that on the probate form would we have to pay capital gains tax and if so would it be on the whole amount or just the difference?

[Bramble]

In a nutshell ...

You will only pay CGT if the gain you make exceeds the annual allowance (which I think is about £10,100 ish). BUT by the time you've deducted the estate agents' fees, legal fees etc etc etc, you will have eaten into your £10,000 "profit" so you shouldn't have to pay CGT at all.

If it looks like you're going to sell for a lot more, it would be worth transferring the house into the names of the beneficiaries who can then sell as beneficiaries and you would then have an annual allowance for each beneficiary to set off against the gain (so if the beneficiaries are you and your Brother, you would have £20,000+ in allowances).

This is complex stuff and I can only advise that you seek advice from a Solicitor or Accountant so that you don't get a shock, but all in all, it doesn't sound like you have anything to worry about.

[paddy1709]

I have just completed probate for my Father in Law.

Firstly - when you declare to the probate office, you just put in valuations. They file them for future use only if required and if the estate is under the threshold there should be no problem. I would assume that 99% of valuations are slightly out - so the £10,000 gap by the estate agent is on the money and I assume that is that is what it is going on the market as and not the sale price.

A word of warning - getting solicitors involved is an extremely costly process!

[rabbitfluff]

Yep totally agree with the above. You'd only pay CGT on the difference between selling price and probate value not the full amount. So with your allowances you should be ok.

[Bramble]

A word of warning - getting solicitors involved is an extremely costly process!

 

I'd agree with this, but only to a point, not taking professional advice (from a solicitor, accountant or whoever) when you need to can end up costing a hell of a lot more than taking basic advice. I suspect lawyers make a huge amount of money unscrambling the problems created by clients who have done something without advice that they definitely would NOT have done with advice. A bit like plumbers, electricians, builders etc making a fortune to remedy DIY that has gone horribly wrong? Just a thought ...

[paddy1709]

Hi bramble

I totally agree with you - but if the value of the estate is below the threshold it is simply a process of getting everything valued and submitting all the valuations to the probate office. They will then either agree or disagree with the valuations and get back to you. I found them very helpful to deal with and even though our estate was very complicated with valuing businesses, shareholdings etc, we had no problem in getting the probate signed off.

I am sure that they look at valuations and previous sales of house prices in an area very closely when granting probate so I do not think a £10,000 margin would greatly interest them.

[paddy1709]

Also when we looked at going down the solicitor/accountant route they fix the price on the value of the estate between 6-7% which is negotiable. If you are looking at using them on an adhoc basis then you are still looking at their hourly rate which is very high as well

[Reikiranf]

Thank you all for your advice, it doesn't look like we'll have a problem but I may get my Brother to phone the HMRC advice line, the first estate agents valued it at £225K and said that what was they knew they could sell it for at the time they valued it but 3 other agents have all said we should achieve a sale price of at least £235K, my brother actually put down £232K on the probate form so we are talking about a minimal amount over the probate value.

 

Being cynical we wonder if the first agent wanted it for a family member or friend as we've looked at other bungalows for sale with them and they want a much higher asking price for properties half the size of my parents one that don't even have central heating or double glazing and Mum & Dad's place has all that done and upvc soffits & fascia boards so is very well maintained.

[paddy1709]

If you go on www.houseprices.co.uk and put in the postcode for the area - you will find out what other houses have sold for in that area

[sadietoo]

Hi there...

 

The IHT "exemption" for your parents' estates will be up to twice the nil rate band (£325000 currently) depending on how much of the nil rate band was used on the first death and any lifetime gifts made within seven years of death by either party. If an estate is under this limit then none of the valuations put into the Inland Revenue will be agreed, and you cannot rely on them, or get the Revenue to agree them, since no tax is involved.

For Capital Gains Tax purposes you will have to declare the disposal of the property on a tax return for the admin period of the estate, and if you want to say that the probate value is the same as the disposal value you can do, but the Revenue may instruct the District Valuer to look at the price of the property, and if they do, you need to be able to support the value you have placed on the property at Probate. It is at this stage that the Revenue will seek to agree a value for probate. In your case, as the gain is likely to be less than £10,000 (and therefore under the Capital Gains Tax exemption for the estate) the Revenue are very unlikely to challenge whatever reasonable value you put on it, as once again no tax results for them....(hoorah!)

The advice to put the property into the names of the beneficiaries before selling in an instance where the gain is likely to be larger (or the sale is taking place some time after the death - the personal exemption for the estate is only available for the year of death and two following tax years) is good provided the beneficiaries have not already used their Capital Gains Tax personal exemptions. Where you have many beneficiaries one can act for all the others in the sale.

 

right...work hat off,

Must get out more....