Probate fee/ Deed of variation

[Gengulphus]

If there will be no IHT due and the property was owned jointly and has been transferred to the survivor, does one still need to pay an estate agent for a formal valuation for probate? I believe half the value must be included in the total asset value when applying for probate.

If the property was held as joint tenants, ownership passes by reason of survivorship and not by operation of the will. As I understand it any such asset is ignored for the purposes of probate and IHT.

As people have said, it does in principle matter for IHT. But if the property is passing by survivorship to the spouse, as in this case, then whatever the value of the property, half of its value is counted for IHT as being part of the estate and as being exempt from IHT under the spouse exemption - and so the property's value makes no difference to the IHT bill. In those circumstances, I wouldn't expect HMRC to question any reasonable valuation they're given - and I would generally expect it to be easy to find an estate agent who will give a reasonable valuation for free, on the basis that it's not especially formal and they're getting a bit of goodwill, i.e. you're more likely to consider them if and when it becomes a question of selling the property. Certainly we just got a single free estate agent valuation which we used for IHT after my father died and the property passed to my mother's sole ownership.

The same doesn't apply if a property passes by survivorship to someone other than the spouse, or for some other reason the spouse exemption isn't applicable.

Gengulphus

[Dod1010]

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Bear in mind also that at all times we need to respect the wishes of the deceased, whose Will it is that we are mucking around with.

No, actually we're not. A DoV can only redirect assets in ways that could be done by the original beneficiaries inheriting and then making gifts from their bequests - all it actually varies is the tax consequences.

It need not be just as simple as saying 'x has been left say £100,000 by the deceased but x has said he/she does not want it and if he/she gets it she will give it to y' On the whole passing the inheritance to y directly might be more efficient tax wise. Actually it is incorrect to say that a Deed of Variation 'can only redirect assets.......... bequests'

If any residuary beneficiary agrees to a reduction in his/her share and it is not affecting other legacies, the executors could introduce a whole raft of new beneficiaries. That is one reason why I on the whole I am not much in favour of Deeds of Variation and would not like it in my own case although obviously I will not be around to see what happens. I would much prefer to let legacies fall where they will through the Will If someone does not want their legacy they could always reject it I guess but few are likely to do that.

Dod

[Gengulphus]

No, actually we're not. A DoV can only redirect assets in ways that could be done by the original beneficiaries inheriting and then making gifts from their bequests - all it actually varies is the tax consequences.

It need not be just as simple as saying 'x has been left say £100,000 by the deceased but x has said he/she does not want it and if he/she gets it she will give it to y' On the whole passing the inheritance to y directly might be more efficient tax wise. Actually it is incorrect to say that a Deed of Variation 'can only redirect assets.......... bequests'

But the Deed of Variation does not pass the inheritance directly to y. If it did, it would automatically affect not just IHT and CGT, but also everything else - things like 'intentional deprivation of assets', bankruptcy, divorce settlements, etc.

What it does (provided it actually states that the relevant sections of the taxation Acts apply) is cause IHT and CGT to be calculated as if the inheritance had gone directly to y (on the condition that it does actually go to y). For all other purposes, it's gone to x and then immediately been given to y by x.

If any residuary beneficiary agrees to a reduction in his/her share ...

Well, any beneficiary (not just residuary ones) can refuse to accept part or all of a bequest - but that's a disclaimer, not a Deed of Variation. A Deed of Variation always has to identify the asset being redirected and who it's redirected to, and be signed by all those entitled to the asset under the will, and its effect only differs from them simply accepting the asset and making a gift of it in that IHT and CGT are calculated differently.

... and it is not affecting other legacies, the executors could introduce a whole raft of new beneficiaries.

Really? Where do you get that from?

As far as I am aware, executors only have the power to introduce new beneficiaries if something says they do. It would be possible to write a will that included such a power, and in the case of a will that was going to create a long-lasting trust, I can imagine it being done to provide flexibility for dealing with future events. And I imagine one could write a Deed of Variation that redirected a bequest one was due to receive to "a person of the executor's choice" or similar wording. But in the absence of suitable wording in the will or a Deed of Variation, no, executors don't have a power to introduce new beneficiaries - and suitable wording in a Deed of Variation can only create a beneficiary for the redirected asset, not more generally.

As for disclaimed bequests, they fall into the residue of the estate and are distributed among the residuary beneficiaries according to the will. (With the exception that if a residuary beneficiary disclaims their share of the residue, I believe the residue is distributed according to the will except that that person is excluded from the residuary beneficiaries. And no, I don't know what happens if every residuary beneficiary disclaims their share of the residue!)

If anyone wants to check up on the above, there's a lot of material (far too much for most, I would guess!) in the links in https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm35000. For example, https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm35161 says what happens to a disclaimed bequest.

Gengulphus

[Dod1010]

I have personal experience as it happens but I am not going into the details as it affected my late wife's estate. There was nothing untoward about any of it and I am satisfied that it is what she would have wanted but sorry you are not correct in this matter.

My point about the residuary beneficiary agreeing is that in our case he was the only one affected by the Deed of Variation; the other beneficiaries legacies were unchanged.

Anyway all of this is far removed from the OP's query and it is getting a bit too close to home so I will leave it there.

Dod

[Gengulphus]

I have personal experience as it happens but I am not going into the details as it affected my late wife's estate. There was nothing untoward about any of it and I am satisfied that it is what she would have wanted but sorry you are not correct in this matter.

Nice pair of attempted distractions - bring up a privacy issue when no-one has attempted to pry into your private affairs, and defend yourself against a charge of untowardness no-one has made. But it boils down to you claiming that I am wrong and refusing to back up that claim. We'll have to leave it at that.

Gengulphus

[scrumpyjack]

Re the suggestion of getting an estate agent to give a free valuation for IHT purposes, that is a rather risky thing to do. The Revenue might well challenge that. You really need a valuation by a chartered surveyor giving his professional opinion - much harder for HMRC to argue with!

Not many estate agents are chartered surveyors. I recently had to have one done for this reason and it cost £200 +VAT

[PinkDalek]

Re the suggestion of getting an estate agent to give a free valuation for IHT purposes, that is a rather risky thing to do. The Revenue might well challenge that. You really need a valuation by a chartered surveyor giving his professional opinion - much harder for HMRC to argue with!

Not many estate agents are chartered surveyors. I recently had to have one done for this reason and it cost £200 +VAT

I dealt with an Estate fairly recently where the [London high end] two free written Estate Agent valuations were both submitted for the main residence and were not challenged. As it happens, the property was sold subsequently at the IHT405 open market value and the IHT405 stated it was under offer at the valuation used, so this would most likely have staved off any enquiries.

On some commercial properties, we were encouraged by our solicitor to go for full Red Book valuations. Our Chartered Surveyor discouraged the solicitor, quoted £500 plus VAT for 3 properties, and prepared short A4 letter size valuations, pursuant to Section 160 of the Inheritance Tax Act 1984, which were accepted, after a quick exchange of correspondence with the Valuation Office Agency.

In the OP's situation, especially where at the moment (either in this thread or elsewhere) she doesn't envisage IHT being in question, I'd probably save the fees.

[macbrains]

In the OP's situation, especially where at the moment (either in this thread or elsewhere) she doesn't envisage IHT being in question, I'd probably save the fees.

For an ordinary domestic situation, I definitely would. Get three estate agents to value the property, take the average of the three and use that valuation. That is perfectly sufficient - or was in the case of my parents house a couple of years ago.

Rob

[Clariman]

Moderator Message:
This is the original Topic for discussion of the OP's question. The discussion of bankruptcy that emerged out of it has been split into a separate topic, so please continue that discussion on the new topic. Thanks Clariman