An overbedding debt is not valued under the tax valuation rules. This confirms a knowledge group of the Inland Revenue.
Overbedding debt
The surviving of two partners often owes an overbedding debt to the children due to the fact that the entire estate is allocated to him or her. To the children comes a claim against their surviving parent for their share of the estate.
In many cases, the parents' home belongs to the estate. Houses are valued at the WOZ value for inheritance tax purposes. Often, the WOZ value is lower than the fair market value. What this results in is best explained using a simplified example.
Calculation example
A parent married in community of property dies in 2022, leaving the other parent and 2 children. The estate is divided under the statutory distribution. The estate includes only the house in which the parents live. The 2022 WOZ value is € 450.000, but if sold, the property would € 550.000 yield.
Then the estate is valued at 50% of €450,000 = €225,000. Of this, the surviving parent and each of the children receives 1/3e: € 75.000. But under the statutory law of succession, the entire house is allocated to the surviving parent and the children receive a claim against the surviving parent whose tax value is €75,000. However, based on fair market value, the claim amounts to €91,667 (1/3e of 1/2e of €550,000).
If the surviving parent dies in 2023 and the WOZ value of the property is then € 475.000, the value of the estate is determined as follows: €475,000 -/- (2 * €91,667) = €291,666 (acquisition per child €145,833). If the overbedding debt should have been valued for tax purposes, the acquisition would be higher, namely: €475,000 -/- (2 * €75,000) = €325,000 (acquisition per child €162,500).
Of course, the fair market value of the property has to be determined. For this, the property will generally have to be valued. The appraisal costs should then outweigh the lower inheritance tax.
The fiscal valuation fiction does not only apply to owner-occupied houses, but also to rented houses. For such houses, not only the WOZ value is leading, but often, by applying the so-called vacant value ratio, the lower value resulting from the fact that the house is let is also taken into account on a fixed basis.