Probate & underestimated estate value

bodorange

I am sole executor of my Dad's estate. Since grant of probate, some previously unknown money has come to the estate from a pension plan in the form of a lump sum. This was taxed at source by the pension company (special lump sum benefit tax) and the residue paid in to a dedicated executor bank account.

Also, when I applied for probate, I may have undervalued the property. This impression is based on recent estate agents' estimates.

The estate is, and will remain, well below IHT threshold.

My concerns are:

- Once the property has sold & administration is almost complete, the estate will exceed the value I provided to the probate department.

- HMRC will charge too much CGT because of my under estimating the property value.

Should/Can I update value of estate for probate?

Are there options for revising the time-of-death valuation of the property and therefore the value of the estate? If not with the probate dept, with HMRC?

Advice/experiences gratefully received.

Keep_pedalling

Are you sure the pension payment forms part of his estate? Most don’t. 

You can’t change the value of the probate, but if you had to do an IHT return you can alter that. How much did you underestimate the property value by?

bodorange

The letter from the pension firm said:

'The above policy is a Retirement Annuity Contract and the benefits are payable to Mr ***'s estate.'

I did not have to do an IHT form. I completed the online probate application, which included an online dialogue to estimate the estate.

If the estate agents' estimates are correct, then I underestimated by over 30%.

Keep_pedalling

That is a big underestimation, how did you do the valuation?

bodorange

It is a flat in a period converted property. I looked at the historic sale prices of some of the other flats and applied similar appreciation.

Keep_pedalling

bodorange said:

It is a flat in a period converted property. I looked at the historic sale prices of some of the other flats and applied similar appreciation.

Unfortunate, where there is no danger of IHT it is always better to over estimate the value to avoid this situation. So I would have got 3 EA valuations and opted for the highest plus a bit. With such a big difference in your guestimate and the true value it might be worth taking some professional advice to see if there are any options open to you. 

bodorange

@Keep_pedalling Thanks I may do that or just call HMRC.

bikeman

I would have thought adjusting a properties value after probate happens all the time. A valuation at the time of death is never going to match the future sale price and so IHT will always be over or under paid and need adjusting. 

It would make more sense for HMRC insist on RICS valuations at time of death and never adjust, but thats not he case. 

Linton

See: https://community.hmrc.gov.uk/customerforums/cgt/77959b81-9a45-ee11-a81c-6045bd0b507d#:~:text=You can amend a probate,the Capital Gains Tax return.

The answer is given by an HMRC rep so should be accurate.

mybestattempt

Linton said:

See: https://community.hmrc.gov.uk/customerforums/cgt/77959b81-9a45-ee11-a81c-6045bd0b507d#:~:text=You can amend a probate,the Capital Gains Tax return.

The answer is given by an HMRC rep so should be accurate.

I'm not so sure about the accuracy of two years to amend probate value.

The terms and conditions of the HMRC Community Forum says that answers there are no substitute for the official HMRC guidance which indicates it's 6 months.

The within the linked thread you will see that when the two years was later queried, as it appeared to conflict with the guidance and legislation, eventually the answer was to contact the IHT helpline.

bikeman

You can bet your life if a property sells for more than the probate estimate, HMRC would be looking for an adjustment.