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Inheritance Tax – the importance of proper valuations.

6th October 2016 by Deborah Pearce

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Most of us are aware that the role of an Executor when appointed under a Will is to administer the estate of a deceased person, in other words, to collect in the assets of the estate, discharge any liabilities and distribute the estate to the chosen beneficiaries.

However,  if an Executor is dealing with an estate which attracts Inheritance Tax then those administrative duties can become more onerous.  HMRC must be satisfied  that all proper enquiries have been made about the estate and in particular the respective values of the assets to ensure that the correct amount of Inheritance Tax is being paid.

In this regard, it is vitally important to ensure that proper and professional valuations (known as open market valuations) are obtained of those assets either by referring to stockbrokers for valuations of shares,  a valuer/auctioneer for that of furniture and personal effects and suitably qualified estate agents (preferably those holding RICS status) for that of any land or property held.   In the past, for example, agents could value  a property for  open market purposes at a certain figure but suggest that the “probate value” would be lower.  The ONLY valuation principle accepted by HMRC is open market value at the relevant date. In some cases valuations will be referred to the District Valuer (acting for HMRC) to negotiate or agree such value(s).

It is not sufficient merely to “guess” or “estimate” values which are capable of being determined by professional valuers. In some cases,  for example,  furniture may be worth little or nothing but a letter from a qualified person confirming this is less likely to be challenged by HMRC.   If an Executor is shown to be negligent in those duties HMRC does have the power to impose penalties and additional interest on any tax due.

Valuations are also important for capital gains tax purposes – a proper valuation obtained of an asset as at the date of death can also form the basis of calculating any capital gains tax liability if that asset is later sold at a profit (subject to any exemptions or losses that may be available).

If you would like any further information on this topic please contact Deborah Pearce on 01202 755980 or email d.pearce@laceyssolicitors.co.uk.

 

 

 

Deborah Pearce

Senior Associate — Private Client

Direct dial: 01202 755983

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  • “Mrs Pearce helped me whilst going through my grief and explained everything in simple language and with sympathy and understanding.”

    Mrs Julie Teasdale

  • “Making a Will was not on the top of my "to do" list as I found the thought of it fairly daunting. But when I eventually contacted Laceys Solicitors the whole process from beginning to end was so easy. I felt totally supported by Deborah Pearce and was grateful for her professionalism, kindness and efficiency. The whole atmosphere at Laceys is very caring, friendly and comfortable. I highly recommend them.”

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    Sharon Barnett

Deborah is a Chartered Legal Executive who has worked in the Private Client department at Laceys for over 18 years.

Deborahs journey to Laceys started in 1985 when she qualified as a FILEX. She then undertook her Associateship in Taunton and completed her Fellowship in Poole.  Aside from a couple of years in Gibraltar, Deborah then gained valuable experience working for various local firms in their private client departments before joining Laceys in 2000.

She specialises in all areas of private client work, wills, powers of attorney, tax planning, Court of Protection, administration of estates, NHS Continuing Care, welfare benefits and all issues related to the elderly and infirm. She finds this area of law quite holistic – it is not just a matter of applying rules and regulations but organising a client’s affairs in such a way that they are made easier and clearer during what can be a very emotional and upsetting time.  Her work requires a very good and patient listening ear, bedside manner and sometimes a sense of humour but still achieving the client’s objectives on time.

When time permits she enjoys reading, cooking and relaxing by the Christchurch River but only when the sun shines! Travelling is a great hobby but there is never enough time to visit all. She has four stepchildren, four grandchildren plus a nephew and niece who help keep her busy at home!

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