Quick probate sales now more important than ever in IHT liable estates
Back to Homeowner Insights

The quick sale of probate property is helping beneficiaries avoid lengthy delays and added costs amidst concerns over the rising numbers of IHT liable estates and average house prices.

Following recent reports suggesting that the number of estates subject to Inheritance Tax (IHT) is predicted to rise by 20% to 30,400 in 2020/21, an increase from 25,200 in 2019/20, many more executors and personal representatives could now face even greater challenges when it comes to dealing with probate.

Currently the IHT threshold sits at £325,000, or £500,000 where children are the beneficiaries of a property. Estates in excess of these amounts are liable to pay 40% in tax, with speculation that this could increase to help pay for the Covid-19 pandemic bailout.

House prices are also on the rise, with average prices in London forecast to increase to £548k by 2025, say estate agents Savills, leaving an IHT liability of at least £19k before any other assets are taken into account.

One of the main challenges for those liable to pay IHT on an estate is that the tax must be paid before probate is issued. Problems can therefore occur because access to liquid assets, provided by probate, is often required to help pay any IHT owed.

Added to this is the pressure that beneficiaries must pay IHT within six months from the end of the month in which the death occurred. If not paid within this timescale, interest is payable to HMRC. These timescales have led to many challenges during the Covid-19 pandemic where financial organisations have been slow to provide the date of death valuations required to prepare IHT accounts.

Date of death valuations are not the only factors causing delays within the probate process. While the implementation of new online systems and centralised probate offices have enabled the speedier digitisation of the process, the impact during this transition has led to significant probate delays; wait times are more than 7 months in unusual cases.

Executors and beneficiaries have turned to alternative sources to free up much needed cash to help pay any tax owed, and avoid interest charges.

One option is a fast property sale, Adam Bonner, Managing Director of Proffered, a guaranteed probate property fund, suggests. The benefits that such companies can offer to beneficiaries outweighs the risks associated with delay.

“We review 4000 distinct data points, eliminating the need for physical valuations or viewings, and enabling us to provide guaranteed offers on properties often within a matter of hours.”

“Proffered can then buy and complete the sale of a property in the family’s chosen timeframe (from as little as seven days) which significantly undercuts typical estate agent timings of 19 to 21 weeks and is much shorter than current probate sale timeframes.”

In addition to avoiding lengthy timeframes that often occur with traditional estate agents, quick sales afforded by probate property funds can also help to cut costs. For example, conveyancing and estate agent fees, and costs such as mortgage payments and those associated with running a household can be reduced or eliminated, providing even greater benefits to beneficiaries.

Bonner agrees, commenting that the typical Proffered offer of 90% of the property value (with a 7 day transaction turnaround) fares well against the return that beneficiaries would actually see from a typical sale process:

“The key message from us is that we’re able to provide greater certainty. When you think about private treaty estate agency, once you account for the standing costs of home ownership which may include ongoing mortgage payments, energy, and council tax, and considered any estate agency and legal fees, a typical probate sale results in around 96% of the value of the property being transferred to the beneficiaries.

So, at 90% we believe we’re offering an alternative, albeit with a premium on certainty and speed as we’re usually able to transact within around 7 days.”

proffered Ltd. is registered in England and Wales No. 13035321
© proffered 2022