How to Value an Estate for Probate
When a loved one dies and you are tasked with executing their will, one of the first things you must do even before probate can be granted is to calculate how much the estate is worth. This is necessary because it will determine whether or not there will be Inheritance Tax (IHT) due on the estate.
Here, the experts at Clough & Willis solicitors will explain how to value an estate for probate in simple steps, to make the process as easy as possible during what will be a difficult time for the family and friends of the deceased. Clough & Willis’ team has solicitors with significant expertise in both probate matters and in property conveyancing, which means that we can provide a valuable overview of how the probate process works and provide assistance, whether that be acting on behalf of the executors to apply to the Probate Registry and pay the IHT from the estate or dealing with the full administration of the estate.
Find out what assets the deceased had
The first stage is to contact banks, financial institutions, utility companies and others with whom the deceased held an account. In this way, you can piece together a picture of their finances at the time they died; whether they owe any money that needs to be paid from the estate before it can be distributed to loved ones, and what assets they held that might form part of the value of the estate. You will need to know about their savings, mortgage and any investments or loans, as all of these affect the overall value of the estate. Once you have received all the information, this then allows for the application to the Probate Registry to be submitted.
You will need to send a letter and a copy of the death certificate to each institution before you will be able to discuss the accounts. Once the Grant of Probate has been granted, this will then allow you to be able to deal with the assets and gather in the funds to enable the Executors to distribute in accordance with the provisions of the deceased’s last Will.
If the deceased owned property, you must obtain the value of this property on the day they died - it is not enough to base this on the amount that the person initially paid for the property, as it must accurately reflect the value that the property could be expected to sell for today. Your estimate can be based on the value of other properties that have recently sold in the area, or you can have an estate agent provide a valuation for this purpose. If IHT is payable, then HMRC require 3 estate agent valuations or a RICS valuation and the team at Clough & Willis can assist you with this.
How to reach a total value
The estate includes the value of the person’s assets on the day they died, as well as any gifts they made in the seven years before they died. This includes any items of value or cash that they gave away, but not money that they paid in exchange for goods or services, or money to pay back any debts they owed. You can usually find out the information you need about these through managing the deceased’s bank accounts or looking through any paperwork they left behind relating to their financial affairs.
If your estimate indicates that the total value of the estate is likely to be over £325,000 (known as the nil rate band), and IHT may be due, you will need to provide a more accurate valuation in order to determine exactly how much tax you will need to pay. If not, there is usually no need for the estimate to be completely accurate, although in either case you will have to report the amount as part of your application for a Grant of Probate.
However, if the estate exceeds £325,000 this does not necessarily mean IHT is due. The Executor would need to consider whether there is any transferable allowance from the deceased’s late spouse (also known as the transferrable nil rate band) which may mean that the estate would not pay IHT until the value exceeds £650,000. If the estate exceeds the deceased’s own nil rate band and the transferable nil rate band, then the Executor must consider whether the residence nil rate band would be available. Our expert team can provide you with advice as to whether IHT would be payable.
If you need help with probate matters, from valuing an estate through to executing or challenging a will, Clough and Willis’ expert team of probate solicitors can help. Call us on 0800 083 0815, or fill in our online enquiry form to arrange a call back at a time that suits you.
