Credit Crunch brings Inheritance Tax Problems.
Families who inherit a home which is difficult to sell because of the credit crisis are being faced with "impossible" demands by tax inspectors.
 
A tough new stance by probate valuers at HM Revenue & Customs (HMRC) means grieving families face big inheritance tax (IHT) bills based on properties which they have absolutely no prospect of selling for some while.
 
A probate expert at estate agents and mortgage brokers Savills said: "In the current climate of failing property values and tax revenues, we are finding HMRC district valuers are not easy people to deal with. Families are in danger of paying significantly too much tax.
 
"In some cases they are proving impossible to deal with. We have executors and family members coming to us, who have filed IHT returns, only to be told by the valuer 'I will not talk to you and will only talk to your Solicitor'.
 
Andrew Jupp of accountants Tenon Group, added: "Things are difficult at the moment, and everything comes down to negotiation. It can be almost impossible to have an argument with HMRC without professional help."
 
Normally people take out a short-term bank loan, but given the credit crunch it may not be as easy to raise the cash as in a normal market. And you may have to pay more for it.
 
Equally worrying is the prospect of paying tax upfront on an asset which turns out to be worth 25 per cent or 30 per cent less on disposal by the end of 2009.
HMRC rules do allow executors to go back and revise their estimate of the value of the property within four years of death, but this should only be considered if you have a professional to negotiate for you and to back up the original valuation. It is a huge mistake to just go by what an estate agent says, as these could give a very rosy picture of what a property is worth.
The whole area of IHT valuations is a mine field.
 
An HMRC spokesman said there was no question that district valuers had adopted a new aggressive attitude to valuing property. He said: " Very long-standing rules require all the assets in an estate - including houses - to be valued for IHT purposes at the point immediately before the deceased' s death. Nothing has changed that, or HMRC' s general approach to valuations for IHT purposes.
 
Where a house is subsequently sold within four years of the death for less than value on which IHT was paid, the personal representatives may be able to make a claim for IHT 'loss on sale' relief but again this may prove fruitless if there is no Solicitor acting for the PR.
 
Antony Keeble from the leading probate specialist Probate-Helper.co.uk said that, "The appreciation and relief clients show at the end of a case demonstrates to us that the best advice is to always week professional advice and sometimes thousands of tax can be recovered."
 
At the end of the day, those that don't seek professional assistance to deal with an Estate Administration may save the Estate some legal costs (which benefits the beneficiaries financially) but time has shown repeatedly that professional assistance often pays for itself.

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