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Capital taxes and family division
A probate or inheritance tax
(known as IHT) valuation is generated in the event of
a death. Additionally it may be required for tax planning
purposes. The instructions will be normally given by
your advisors; solicitors, trustees, executors or accountants.
The current inheritance tax threshold is £300,000
(tax year 2007-2008). If the total estate, which includes
chattels, property, shares etcetera exceeds this amount
then you will require valuations for all to calculate
the total tax liability.
Owing to security considerations
a pre-assessment or estimate of the cost of the work
required is not always practicable; often the work has
to be done as a matter of urgency. Once a valuer has
recorded all chattels in the estate and identified the
specific bequests, if any, then the executors can commence
administration of the chattels part of the estate.
Normally there are two stages;
first a discussion document is prepared. This enables
the beneficiaries in the estate to identify what items,
if any, need to be sold from the estate. Secondly, once
this information is in hand then a final document for
submission to the Inland Revenue (CTO) via your advisors
can be submitted. Tax liabilities can then be calculated
from the total of the document for those items to be
retained. The values of items to be sold, if any, have
the tax liability calculated on the sale value.
Where specific bequests (chattels)
are mentioned in a Will then the location and safeguarding
of these becomes a priority. A valuer will normally
give an indication as to what the contents should be
insured for, they will also give advice on security
matters. Executors should remember that most contents
insurance policies have what is known as a 30 day exclusion
clause. This means cover will be cancelled if the property
is left unoccupied for longer than this period. Insurers
should be notified immediately upon a death.
Thresholds for this type of valuation
are agreed in advance with the executors but it is essential,
in case of enquiries from the Inland Revenue (CTO) that
a record of all items is made so that figures for unspecified
items in the inventory can be justified.
On occasion it is advisable to
remove valuable items to a safe store to protect them
from burglary. It is quite common for a vulnerable deceased’s
home to be burgled especially so if they were notable
and an obituary was published.
The valuer should be prepared
to enter discussions with the Inland Revenue (CTO) when
a dispute as to values arises. They may well ask the
valuer to justify their values on certain items.
A capital gains tax (CGT) valuation
for individuals and trustees utilises varying annual
exemptions that can be verified either through the Inland
Revenue or their tax advisors.
With chattels the gain is calculated
on the difference between an items sale value now and
its value as at April 1982 less allowances. This will
often entail a lot of research for the valuer to establish
what value an item had 26 years ago. Figures are often
disputed therefore diligence, as with all valuations,
is essential.
Family division valuations are
often difficult for all parties involved. Normally caused
because of family break down they are emotive and the
valuer has to take even greater care than normal not
to side with any party.
Any agreed value basis can be
used as long as there is continuity, although legal
advisors can insist on a specific type of value i.e.
insurance replacement, probate etcetera. Often the valuer
will provide two figures for each item above an agreed
threshold, a low and high figure like an auction estimate,
and leave it up to the clients to decide which they
use.
As with probate valuations if
an insoluble dispute arises as to who gets what the
best course of action is to consign the items to auction.
This enables the parties to bid what they want for their
items and then share the pot of money after the event.
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