What is the purpose of a probate valuation?
Updated: Sep 16, 2022
What is a Probate Valuation and when is it needed?
A simple enough question that we're asked many times every month. We'll try to answer it simply as there are many other more complex aspects of dealing with and managing the Estate of someone who has passed away.
A probate valuation is a system that helps to sort the value of someone's assets when they pass away. In the last few years there have been changes to the inheritance tax threshold so it is more important than ever to obtain accurate (and detailed) valuations for everything in the Estate.
There are numerous reasons for having an Estate probate valued, these can include:
Inheritance Tax liability due to HMRC
Estate Duty due to HMRC
Fair division of Assets
Indication of value for sale purposes
The main reason by far is usually to establish the overall value of the Estate including possessions, property, vehicles, stocks and shares, cash, jewellery, and investments, which after allowances may be subject to taxation.
Probate Vaulation is a different figure to other types of valuation.
Probate valuation vs sale price - for example, suppose there is a piece of jewellery in an Estate that was recently purchased for £1,000 from a reputable jeweller, the probate valuation would be considerably less than £1,000 as it is based on other factors such as how much you could expect to sell the item for privately. A Probate Value is generally higher than an Auction Estimate and lower than the original retail price.
Probate valuation vs insurance valuation - this is another frequently mis-understood method for valuing items, particularly jewellery and watches for probate valuation purposes. A valuation for insurances purposes states how much it would cost to buy a replacement item on a 'like-for-like' basis from a suitable retailer. This will take into account things like increases in gold and silver values, so will always be significantly higher than a probate valuation.
Using an insurance valuation for probate valuation purposes over states the value of items, so if the Estate is liable for estate duty it will end up paying more tax than it needs to. It also means that people who have received gifts for up to seven years prior to the person passing away may also be liable to pay inheritance tax on their gifts. This highlights the importance of working with a reputable probate valuer such as Provals to minimise both estate duty and inheritance tax.
Please ask us about Probate Valuations and we can make sure your task is easier and that you comply with the Law.