Is there a pitfall to over valuation?

back_to_school

The valuation on a property is £800k and there is a further 10% markdown for occupancy, so £720k, but for the sake of family harmony the agreed transfer value, which is part gift and part consideration within the family is to be £840k. What figure should I use on the IHT forms. The higher figure is still under IHT but might draw attention, I don't want to be worrying about holding onto evidence for the next year that doesn't even correlate, should I offer both values to the IHT? Are there any pitfalls in over valuation? Is it possible to separate out the consideration from the will; perhaps by paying (amount equalling consideration) for an agreement between the beneficiary's to fulfil the transfer or would that still be deemed within the will?

Yorkshireman99

back_to_school wrote: »

The valuation on a property is £800k and there is a further 10% markdown for occupancy, so £720k, but for the sake of family harmony the agreed transfer value, which is part gift and part consideration within the family is to be £840k. What figure should I use on the IHT forms. The higher figure is still under IHT but might draw attention, I don't want to be worrying about holding onto evidence for the next year that doesn't even correlate, should I offer both values to the IHT? Are there any pitfalls in over valuation? Is it possible to separate out the consideration from the will; perhaps by paying (amount equalling consideration) for an agreement between the beneficiary's to fulfil the transfer or would that still be deemed within the will?

Have you had a professional valuation by a RICS or similar? The value for probate has to be a realistic one at the date of death. You are on very dodgy ground if you try and fiddle the figures. The probate value will be the base for any future CGT calculations. Familky harmony is irrelevant.

Linton

Is the idea that someone in the family buys the house from the other beneficiaries for £840K?

Surely the actual value of a house is what someone is prepared to pay for it, a professional valuation is purely an informed estimate. In this case since someone is prepared to pay £840K for the house, a figure higher than the informed estimate, the house's true value is £840K which can be used in probate. If you use the £720K is there a danger of a significant CGT payment when the house is sold for £840K?

back_to_school

yes, the beneficiary is buying out the other over and above their respective gifts, while the value agreed reflects past discrepancies in previous gifts, hence for harmony.
No concerns about cgt.
I am concerned to rewrite the will by family arrangement, and I want the will to reflect the IHT form, and visa versa, the IHT form is first, and I don't want to restrict myself later with the will.

Yorkshireman99

back_to_school wrote: »

yes, the beneficiary is buying out the other over and above their respective gifts, while the value agreed reflects past discrepancies in previous gifts, hence for harmony.
No concerns about cgt.
I am concerned to rewrite the will by family arrangement, and I want the will to reflect the IHT form, and visa versa, the IHT form is first, and I don't want to restrict myself later with the will.

By re-wrting the will do you mean deeds of variation? The excecutor cannot vary the will in any other way and all affected parties have to agree. You really cannot juggle the values just to suit the beneficiaries. With a property of that value HMR&C are almost certain to involve the district valuer and you need a professional surveyor to agreee a value at the date of death with them. Having done that then you can do the DOVS if required but the probate value at the DOD WILL form the basis for any future capital gains that may arise. They canot be ignored.

Linton

Another consideration - if the beneficiary over pays for the house wont there be unnecessary Stamp Duty?

back_to_school

Which is why I am also thinking to include a separate 'agreement' for the consideration, so it doesn't go into the estate making the estate over valued?
It would be easier just to go along with an over valuation, not subject to iht, easier for the will anyway, but why not consider the lowest value, even if that creates problems drafting the will by dov.

getmore4less

You may have a problem with a DOV as any changes by beneficiary cannot have substitutions. ie AIUI you can't give up a share of the house for something else like more of the cash.

DOV are really a tax vehicle for future IHT and CGT that beneficiaries use. Executors only get involved if current IHT is changed and that usually only happens if there is charity or diversions to/from a spouse.

sounds like what you should be doing is valuing the house at DOD and transferring the beneficial interest to the beneficiaries and let them sort out from there.

Artificially increasing the value when it is a connected party buying could attract attention especially as you have admitted it is just to adjust things, that probably should be done with gifts.

back_to_school

Gifting - it's a bit utopian for my family, I can see their confused faces now, having nothing to sign!
Thanks, I'll suggest it.

[Deleted User]

The estate agent that valued this house said it was worth £72.5k, but put it down as £70k because the valuation was only for inheritance tax. The District Valuer was having none of it, and promptly put it back up to £72.5k.

Yorkshireman99

back_to_school wrote: »

Gifting - it's a bit utopian for my family, I can see their confused faces now, having nothing to sign!
Thanks, I'll suggest it.

It sounds as if you need some paid for professional advice from an IHT specialist. I am assuming you are the executor. If so your responsibility is administer the estate according to the law not to do the family’s bidding. There really is no option to do anything but have house professionally valued and submit the probate application using it.