When someone passes away, one of the most important steps in administering their estate is determining its value. This process is essential for ascertaining whether Inheritance Tax (IHT) will be due. In going through the process of valuing the estate, you will also become aware of which assets require a grant of probate in order to be cashed in, sold or transferred.
In this guide, we explain how to value an estate accurately, what needs to be included, and the practical steps executors and administrators should take.
What Does “Valuing an Estate” Mean?
Valuing an estate involves calculating the total worth of everything the deceased owned at the date of death, minus any debts and liabilities. This figure is used:
- – To apply for a Grant of Probate (or Letters of Administration)
- – To assess whether Inheritance Tax is payable
- – To ensure assets are distributed correctly to beneficiaries
The valuation must reflect the open market value of assets at the date of death—not what they were originally purchased for or what they might sell for later.
What Assets Should Be Included?
Executors must identify and value all assets owned solely by the deceased, as well as their share of jointly owned assets. Common categories include:
1. Property
- – Residential homes
- – Buy-to-let properties
- – Land
A professional valuation from an estate agent, for residential property, or from a chartered surveyor, for land and other property, is advisable. If using an estate agent’s valuation then best practice is to get a minimum of three valuations.
2. Bank and Building Society Accounts
- – Current accounts
- – Savings accounts
- – ISAs
Financial institutions will provide date-of-death balances upon request. It is important to get these formal date-of-death valuations rather than relying on normal bank statements as they will also address any accrued interest which has not been credited to the account.
3. Investments
- – Stocks and shares
- – Unit trusts and investment funds
- – Bonds
Quoted investments are typically valued using their market price at the date of death. Depending on the nature of the investments, you may be provided with a valuation of the holding or you may be told the number of shares held.
4. Personal Possessions
- – Jewellery
- – Vehicles
- – Antiques and artwork
High-value items may require specialist valuation.
5. Business Interests
If the deceased owned a business or shares in a private company, a professional valuation will be required.
6. Pensions and Life Insurance
Some policies may fall outside the estate (e.g. written in trust), while others must be included. Each policy should be reviewed individually.
What Liabilities Should Be Deducted?
To arrive at the net estate value, you must deduct any outstanding debts that the deceased owed at the date of their death, including:
- – Mortgages
- – Credit cards and loans
- – Utility bills
- – Tax e.g. income tax or capital gains tax
Only legitimate and provable liabilities should be included. In addition to the liabilities which the deceased owed, the costs of the funeral are treated as a liability of the estate, notwithstanding that it will not be paid for until after the date of death.
Jointly Owned Assets
The deceased’s share of any jointly owned assets must be accounted for. This can commonly include properties and/or bank accounts. Only the value attributable to the deceased’s share needs to be included within the estate.
Gifts Made Before Death
Certain gifts made in the seven years prior to death may affect the estate’s value for Inheritance Tax purposes. These are known as potentially exempt transfers (PETs) and must be declared.
Executors should review financial records carefully to identify any such gifts.
The contents of this post do not constitute legal advice and are provided for general information purposes only ■
