Concerned about how to pay inheritance tax before probate? In need of advice on how to value personal property for probate? Given the importance and sensitivity of such transactions, sourcing independent expert advice should be your first port of call.

What Is a Probate Property?

Dealing with the loss of a loved one is challenging enough without the added complications of handling complex probate and inheritance tax issues. In the simplest terms, a probate property is a property an individual takes ownership of that has been named in the final will and testament of a deceased individual.

Irrespective of whether you intend to sell the property, you may be liable for probate tax, aka inheritance tax, in the United Kingdom. The importance of an accurate probate valuation of property cannot be overstated, nor can securing expert representation help relieve some burden. From obtaining a grant of privilege to dealing with all administrative and taxation requirements, it’s important to have an experienced team behind you.

Do I have to pay inheritance tax?

In England and Wales, you will be liable for an inheritance tax payment if the total estate bequeathed to you has a combined value in excess of £325,000. This is the existing inheritance tax threshold—the limitation of the inheritance you can receive without having to pay tax.

If the total value of the estate exceeds £325,000, a full 40% is payable on the amount that goes beyond this threshold.

What Does Probate Have to Do with Inheritance Tax?

When an individual receives ownership of a property through a final will and testament, they must obtain a Grant of Representation to confirm their legal ownership of and rights to the estate. In order for this to happen, the entire estate must be valued and inheritance tax obligations calculated.

The process cannot be completed until the recipient of the estate is able to prove that they have paid the inheritance tax due in full or provide formal evidence that inheritance tax is not payable. By working with an experienced and reputable probate specialist, the entire process of evaluating the property and establishing inheritance tax liability can be accelerated and simplified significantly.

A typical example

In a working example, an individual is left a property in the final will and testament of a parent. The property has a probate valuation of £475,000, which is also the maximum value the property is likely to sell for in the current market. Assuming this is the total value of the deceased individual’s estate, this amounts to £150,000 above the current inheritance tax exemption threshold.

This would mean that 40% of the £150,000 would be payable to satisfy inheritance tax requirements, amounting to a total of £60,000.

However, there are countless variables that could affect the total tax liability in both directions. From charitable contributions to capital gains tax to the type of property and its intended use, it isn’t quite as simple as establishing basic inheritance tax obligations alone.

The importance of responsible representation

The representation you secure throughout the process could have an enormous impact on the costs incurred. Avoidance of taxation isn’t an option, but there are often avenues to explore to minimise the amount of tax you’re required to pay. all while simplifying a complex legal and legislative process during an incredibly difficult time of life.

At the earliest possible stage, therefore, secure the most capable and experienced representation available. Doing so could save you time, money, and a lot of unnecessary hassle along the way.

The last decade has seen the ‘rebirth’ of the specialist sector. The current specialist lenders are more conservative than in the past and are governed by tighter legislation, such as increased capital requirements, making them less vulnerable in the event of a downturn. There have been various reasons for this, with more customers struggling to meet the strict lending criteria of high-street banks. Specialist lenders are able to deal with more complex applications that would normally fall outside the main stream lender’s criteria, for example, someone who doesn’t have a regular stream of income, has recently moved jobs, or is purchasing a right to buy or shared ownership property.

Furthermore, self-employment and contracting are growing. Unusual income patterns have become common, such as those of freelancers or people with varying incomes, etc. Lenders who use credit scoring will often turn these clients away. Specialist lenders build themselves around specific customer groups and are therefore able to help these clients. Also, specialist lenders will help clients who have had a small blip in their credit history, which can usually be easily explained, or due to personal circumstances such as bereavement or unemployment. These individuals are not repeat offenders and have a good history before and after such an event. Unfortunately, the mainstream lender will not see it this way.

The mainstream lender has shown no interest in winning business that falls outside their automated underwriting and is designed to help the conventional borrower. This means that the margins for the specialist sector should remain higher or keep growing.

Richard Tugwell at Together says, ‘In many ways, the specialist market acts as a complement to the mainstream lenders and ensures that the customers have a choice. I think that the challenge for the specialist market is ensuring more consumers are aware of this offering, and that’s something that the lenders and brokers need to work together on.’

Specialist lending is now more regulated, and we should see less volatility than before as the focus is on affordability. This type of lending is set up to cater to complexity, not poor quality or irresponsible lending. Brokers who keep a closed mind to this sector are losing out on a big share of the growing specialist/subprime sector.

Specialised lenders are more suited to adapting to changing criteria compared to high-street lenders. Mainstream lenders take longer to change their criteria due to the legacy systems. Mainstream lenders need to adopt a manual underwriting approach instead of credit scoring. Brokers need to ask or determine what type of lender the client needs. Brokers need to do their own research to get an understanding of this market and take advantage of these opportunities so that they can help every single customer find the best solution for them, whatever their circumstances.

Research has also suggested that people are not fully aware of the options available to them. As traditionally, the market has focused on mortgages for house purchases or cash. It is important that the buyers are made aware of all the options available to them in the market so that they can make informed choices.

Everybody thinks that fraud is the kind of thing that happens to other people rather than themselves. That is, until it takes them well and truly by surprise.

On the plus side, there’s plenty we can all do to significantly reduce the likelihood of being targeted by fraudsters. Or at least, prevent significant damage from being done if you are targeted.

Here are 10 simple yet effective things to start doing right now to protect yourself:

1. Identify scams
   First up, it’s worth reading up on and remaining up-to-date with the latest scams. From e-mail phishing to telephone scams to various types of data theft, it’s worth checking online resources to learn exactly how to identify a scam when you see it.
2. Keep personal information secret.
   Under no circumstances should your personal information ever be given to anyone other than yourself. Be suspicious of any ‘company’ that gets in touch with you and asks for your personal information.
3. Change your passwords and PINs.
   Along with ensuring your passwords and PINs are as strong as possible, it’s also important to ensure that they are changed on a regular basis. Never use anything that could be easily guessed or gradually worked out.
4. Check out your credit report.
   Check your credit report from time to time for any signs of suspicious activity. Should you come across anything suspicious, report it to the relevant authority or service provider immediately.
5. Shred sensitive documents.
   Never make the mistake of throwing away our documents that contain any potentially sensitive personal information. Shred or burn such documents to prevent your personal data from falling into the wrong hands.
6. Watch for unusual activity.
   It’s also important to keep an eye on things like bank statements, credit card bills, and all your online accounts in general for signs of unusual activity. Always take anything, even slightly out of the ordinary, seriously.
7. Share your knowledge.
   Try to ensure that your friends and family members take an equally proactive approach to fraud prevention. Criminals typically have absolutely no shame when it comes to targeting those who are most vulnerable, i.e., those who do least to protect themselves.
8. Be suspicious of everything.
   From phone calls to emails to promotional information, be suspicious of anything and everything that comes your way. Unless you are 100% convinced of the legitimacy of the communication and its source, treat it as suspicious and stay away.
9. Avoid public Wi-Fi.
   Always remember that it only takes a matter of seconds for your device and your personal information to be hacked when using public Wi-Fi connections. which means that if you are going to use a public Wi-Fi connection, avoid accessing any of your accounts or entering any sensitive information or credentials whatsoever.
10. Report it
    Last but not least, each and every time you come across anything that is even remotely suspicious, it needs to be reported. Even if it turns out to be nothing, it is better to be safe than sorry. The problem is that each time suspicious activity is not brought to the attention of the authorities, somebody somewhere is getting away with scamming members of the public like you.