Unsure if this is the right forum for this query, however as a will trust is involved, I thought I may ask this question here.
I have a client who we are completing probate for and compiling the estate value. There is a parcel of land to the rear of the estate owned by another party. Since the passing of the lady, the parcel of land has now increased in value due to gaining planning permission. The question I have is as the estate provides access to the parcel of land, the estate value has increased by a certain amount now. For probate purposes, do we state the value on the date of the lady passing away, or the value (increased) estate now ?
From the tax law point of view the answer is that it is the value at the date of death that is subject to IHT. Any increase in value which truly occurred after the date of death is a capital gain and taxable as such.
However, I infer from your description that the planning application for the adjoining land was submitted showing access over the deceased’s property. If my assumption is right there was probably a significant ‘hope value’, dependent on the likelihood of permission being granted, already latent within the property value and it should be reflected in the valuation used for inheritance tax. I think this would be the case whether or not the deceased was consulted about the application or given the appropriate notices under the planning regulations.
You will need a Red Book valuation by a qualified surveyor
The value to be used is the market value at the date of death i.e. ignoring outside events after death may have increased the value.
Provided IHT is payable on the estate this will also be the established capital gains tax cost for any future disposal by the personal representatives or the estate beneficiaries.
Depending upon the increase in value, for effectively what is a ‘ransom strip’, consideration may well need need to be given to the most effective disposal [by personal representatives or estate beneficiaries following on to assent to them by personal representatives] if an offer to purchase is made (presumably by the owner of the land who has acquired planning permission for their plot and needs access).
The value for inheritance tax (probate) is the value as at the date of death.
However, if the planning application now gained by the adjoining owner was already in hand, the value of the deceased’s land might include “hope” value to reflect any expectation of the grant of planning permission. When instructing a valuer, this should be drawn to their attention, as should the requirement for them to provide an “open market” valuation (s.160 Inheritance Tax Act 1984) which should reflect any development expectations, etc.