Amendment to Probate

KerryZ

Hi, 

I am hoping someone can help me with a query I have in relation to an incorrect probate entry for the value of my later mother-in-laws house.

 My mother-in-law passed away in Jan 20 and my husband and I completed the probate paperwork ourselves (as the estate was valued way under the inheritance tax threshold), estimating the house value to be £120,000 which was an estimate concluded by an online search of similar properties in the area in the previous 6 months. A few short weeks after the grant of probate was issued we had a formal valuation on the the house which was estimated at £160,000. My daughter has been staying in the property for the past 11 months and now wished to purchase the property which we have agreed a sale price of £145,000 which is classed as a discounted - 'gifted rate' and consequently is leaving us will a bill of around £8.5K in capital gains tax. 

I guess my question is, can the grant of probate be changed to reflect the actual value of the house at the time of death or will just have to accept we should have been more organised in valuing the property properly? Many thanks - Kerry 

Savvy_Sue

Have you taken into account your allowance(s) to set against the CGT? Are you selling from the estate, or has ownership passed to the beneficiary/ ies?

Keep_pedalling

An estate has a CG allowance of £12300 so your gain is £40000-12300 = £27700 and the rate payable by an estate is charged at 28% so total tax payable is £7756. 

At the moment your gain is totally hypothetical between your original guestimate and an estate agents guesstimate, but if HMRC have accepted your original valuation for probate they are not going to query you selling to your daughter at or near to your original valuation. 

KerryZ

Hi - yes I’ve calculated the allowances. The ownership has passed straight to my husband as the single beneficiary but he is yet to update the land registry as we planned on selling ASAP but then our daughter moved in. 

KerryZ

Keep_pedalling said:

An estate has a CG allowance of £12300 so your gain is £40000-12300 = £27700 and the rate payable by an estate is charged at 28% so total tax payable is £7756. 

At the moment your gain is totally hypothetical between your original guestimate and an estate agents guesstimate, but if HMRC have accepted your original valuation for probate they are not going to query you selling to your daughter at or near to your original valuation. 

thank you for responding. I guess then the issue is that the valuation on the probate was £120K but the actual valuation a few weeks later was £160K so the difference will be taxed? Feel very foolish for not waiting for an actual valuation now! 

Savvy_Sue

Just a thought, but is this a situation where it would be worth doing a Deed of Variation, passing the house direct to your DD, or to the pair of you, or to her and your DH, or even to the three of you?

If it went direct to your DD, there would be no CGT to pay until she comes to sell, and then assuming it's been her PPR (ie she's living in it) there'd be no CGT.

And passing it to you and your DH or the three of you, you'd have either 2 or 3 CGT allowances to play with, and if you need to have some 'return' on the deal you can still have it by your DD buying out the shares which aren't hers. 

It would also have the advantage of not being part of your DH's estate, which may help with your IHT mitigations if needed. 

You have to do this within two years, and I'd recommend getting advice and getting it drawn up, so you'd need to crack on. And it may be that I've completely missed something vital which makes this a really Dumb Idea, in which case I'll soon be told ... 

getmore4less

If the estate did not pay IHT the value has not been assertained.

You can have the capital gain assessed on value at DOD not value used for probate.

DOV might not work if you want the money as you can't DOV and get the money you would have selling the house.

Savvy_Sue

getmore4less said:

DOV might not work if you want the money as you can't DOV and get the money you would have selling the house.

Indeed, but would DOV to 2 or 3 beneficiaries help? More CGT exemptions reduces amount due.

KerryZ

Really appreciative you taking time to comment. I’m trying to find the easiest solution really which I’m thinking maybe a change in entry on the probate form. Due to lock down restrictions at the time we were not able to get the property valued hence I estimated £120k. 8 weeks after pro-bate was submitted we had the property valued at £165k and I have the documentation to prove this. It has since been valued around £165k which is the amount my daughter is wanting to put on paper for the mortgage valuation. We are physically selling at £145k and therefore gifting £20k. I just don’t know what to do for the best as I feel we have justification to not be charged CGT but I’m struggling to establish how to amend probate or if I even need to! I guess phoning the gov helpline is the next step but it takes so long to get through. Thank you once again for your help :-) 

Savvy_Sue

You're facing a bill of 8.5K in CGT - for a much smaller sum than that you could get advice from a solicitor specialising in probate, or an accountant who understands these matters. Phone around and get a few quotes for specific advice on whether a Deed of Variation would be helpful.