A common question we often come across when dealing with estates and trusts is the question of when formal valuations are required, particularly with regards to property and contents. Estates will commonly include an interest in a property and everyone will own some personal possessions and contents. In addition, it is not uncommon for trusts to hold interests in properties.
With this in mind, we regularly need to obtain valuations of properties and contents. When dealing with an estate, any property and/or possessions/contents will need valued as at the deceased's date of death. When dealing with trusts, any property being transferred into or forming part of a trust will need valued as at the date of transfer and possibly also at later events, for example if the property is being transferred out of the trust to a beneficiary or if there is another form of chargeable event for inheritance or capital gains tax purposes.
Valuing a property or contents for an estate
When valuing a property or contents for an estate, an informal valuation may be sufficient - for example if there will be no inheritance tax payable by the estate and the executor feels comfortable that they can provide a reasonable estimate, then this may be used. Similarly if there are thought to be no contents or possessions of particular value, then an estimate may be used for these. However, if inheritance tax is going to be due by the estate or the value of the estate is bordering on the inheritance tax threshold, then a professional valuation should be obtained to ensure the executor is fulfilling their reporting obligations and calculating any inheritance tax due correctly. In addition, a formal valuation as at the date of death may end up being required at a later date – for example, if the property is to be sold or is being transferred into a trust meaning that the base or acquisition cost will be needed for tax purposes.
For trusts, formal valuations are likely to be needed any time a property is being transferred in or out of a trust or indeed being sold within the trust, due to tax and reporting requirements. Moreover, there may be other occasions when formal valuations are needed, for example many trusts must be reviewed every ten years from an inheritance tax point of view and, depending on their value as at each ten year anniversary, may need to pay tax. Trustees who own a property or an interest in a property as part of the trust assets will therefore need to obtain a formal valuation of the property as at such anniversaries to ensure they are fulfilling their duties in reporting the trust's value correctly and paying the appropriate sum of tax (if any) due as a result.
If a formal valuation is needed, or even preferred, then this should be obtained from an appropriate source – for example a surveyor for a property or an auction house for contents. In addition, specialists may be best – for example if the property is a farm or the contents include antiques. Any valuations should provide the market value as at the appropriate date. If the valuation is required for an estate, the valuation should be given as at the date of death, whereas if the valuation is needed to report a trust's ten year anniversary, the valuation should be as at the date of that anniversary – and this should be stated clearly on the valuation in case later reviewed by HMRC.
Valuations will generally involve a property visit (unless the valuer has previously visited the property or otherwise knows it well enough to feel comfortable to provide a value without a visit) which has proven problematic during lockdown. However, with lockdown now starting to ease, we have found that valuers are now able and willing to undertake property visits in order to provide valuations, provided that appropriate safety measures are put in place and followed.
Get in touch
Please do not hesitate to get in touch with a member of our Private Client team. We have solicitors and offices across the country and are ready to help.
Elgin: 01343 542623