Valuing the Deceased’s Estate
|Where do I start?
What information do I need?
I am a personal representative (executor or administrator) and don’t know where to start valuing the estate. What do I do?
Whatever type of Grant is required by the personal representatives (executor or administrator) there is certain information and documents that must be provided to the Probate Registry and/or HMRC, before a Grant will be issued.
In addition to the application form (PA1) and the Oath, which confirms who the Personal Representatives are who will be administering the estate, a full inventory of all the persons assets including any personal belongings of value at the date they died, must be completed.
As well as the assets of the estate being shown, any debts, funeral expenses and other expenses known as testamentary expenses are also included. Testamentary expenses include the cost of obtaining the Grant, the costs of collecting and preserving the assets, administration costs, for example valuer’s fees and any Inheritance tax payable on the estate.
The most common items that you will need to consider, value and include in the Inheritance tax forms are as follows; you can read more about each item below or click on the link;
Money including cash, bank and building society accounts
Pensions and Life Insurance Policies
Jointly owned property including bank accounts and land
Stocks and shares, PEP’s, ISSA’s, TESSA’s, Unit Trusts, Bonds & Gilts
Property and land
Gifts made in the last seven years before the date of death
Not sure you’ve found all the assets?
Debts and Liabilities
Personal chattels are all the personal belongings of the person who has died. They include all someone’s personal possessions such as jewellery, furniture, china, pictures, books, cameras, television, computers and cars and any other personal possessions they owned. They do not include money, investments, property or any business assets.
Any item with a value less than £500 does not have to be individually valued. A realistic selling price based on the open market value will be sufficient. Most of us believe that everything we have will have a value. Unfortunately, we often mistakenly believe that the items we own are more valuable than they are, particularly when considering open market values.
The open market value will depend on what is fashionable at the time and whether there is a market on that date for such items, which would also bump prices up, amongst other things. You may have a beautiful 18th century mahogany large dresser that was valuable at the time, but today it is considered too large and the wood too dark for most houses. This reduces the size of the market that may consider purchasing such an item and in turn can affect the price you are likely to achieve, despite it being an antique. In no circumstances would an insurance valuation be an accurate guide. Insurance valuations are not open market valuations and are not adequate when valuing items or properties.
When dealing with a property’s contents, it may be sensible to ask an auctioneer to attend the property and provide a valuation for you. They will need to value the contents of the house, as if they were sold on the open market on the date of death. Auctioneers have experience of what things are selling and the likely amount you would receive for them. They would have to provide a written estimate confirming that it relates to the belongings of value on the date the person died.
Any individual items that are worth over £500 should have a separate valuation. This can be included in the written estimate that an auctioneer gives provided the item is described separately from the general household content valuation (which would include all items valued individually less than £500).
Any specialist items such as art works, cars, boats, antique furniture, first edition books, collections and expensive jewellery, for example, should be valued by a specialist in that field, if an auctioneer is unable to value them. The specialist should provide confirmation in writing, of the open market valuation on the date the person died.
Clothing and household items such as pots and pans are generally of very little or no value. It is worth however checking pockets of clothing and contents of bags, in case any money or other important documents have been left in them, before disposing of anything.
In some instances, it may be necessary to arrange a house clearance, particularly if the property is to be sold and there are a lot of items to clear. It is of course sometimes nice for family members to have mementos from someone’s home and provided they are of no value or the value can be deducted from any legacy due to them, then it is possible to retain items for those people to receive when the estate is eventually distributed.
Money including cash, bank and building society accounts.
Once you have collected any information that you can find in the personal belongings, you will need to contact any financial institutions directly, including banks and building societies. The organisations need to be inform of the death and you need to obtain the information needed to complete the necessary inheritance tax forms to get the Grant.
When contacting the organisations, you will need to provide details of the person who has died, confirmation of their account number(s), details of who you are and confirmation that you are dealing with the estate, as the personal representative. The organisation will also require an official copy of the death certificate. This will be returned to you, usually by registered post once they have taken the necessary information.
The information that you need to request is as follows :-
• The value of the money held at the date of death
• confirmation of the amount of income received during the last tax year up to the date of death
• request that any accounts be frozen, so no one can take money out without the correct legal authority
Banks and building societies should send a bank statement covering the period since the date of death. These will show any sums that have left the account since the person died, such as direct debts to pay bills or if someone has accessed the account without authorisation, following the death.
Once the bank accounts are frozen no direct debits or standing orders will be honoured. The bank should send you a list of these types of transaction but if they don’t either request the details or you can check the bank statements. For any DD or SO transactions, it will be necessary to contact the person receiving the amount to let them know of the death and to also obtain confirmation of any debt owed that the estate remains liable for. See below Debts and Liabilities
If the person who died ‘loaned’ family or friend’s money, that they believed would be repaid or was in fact being repaid, details of the loan need to be obtained. These are often known as soft loans. Any loan of this sort is potentially an asset of the estate and should be collected from the person who received the loan (or it may be possible to deduct the outstanding sum due under the loan from any legacy they are due to receive). However, to include the sum of the loan as an asset of the estate the loan must be evidenced. Evidence must be in a written or verbal agreement detailing the repayment terms, or there must be proof that the person who died was receiving the repayments regularly.
Pensions and Life Insurance Policies
You will need to include the value of any pension or life insurance policy that make a lump sum payment after the person died. A pension may be a work, occupational or company pension, arranged by the person’s employer or it may be a private pension.
If a pension provides an annuity to a surviving partner this is not included in the valuation.
It will be necessary to write to the pension provider and request the details of the pension, including a final statement for the pension and confirmation of what type of pension arrangement it was. The pension provider will also need an official copy of the death certificate, together with the pension policy number where available. It may be that a payment has been made since the person died that was not due. The pension provider may request any overpayments are returned. You will need written confirmation of the amount, which will then need to be refunded and indicated as a debt on the inheritance tax form.
If you believe the person had an occupational or private pension that may have been frozen or you are unable to locate any details in their belongings, then you can check with the Pension Tracing Service here: https://www.gov.uk/find-pension-contact-details
Life insurance policies will either pay out to the estate and in which case the value must be included in the inheritance tax form, or they may have been set up in a trust naming a particular beneficiary. If this is the case, the value of the policy is not included in the estate valuation. The person nominated can usually receive the sum immediately, once the paperwork is processed by the insurers without waiting for the Grant to be issued.
The life insurer will need to be contacted and informed of the death. You will need details from them of any pay out that is due to the person’s estate or what if any payment is due to a nominated beneficiary of the insurance policy. They will need to see an official copy of the death certificate. You will need to provide the policy details including the name of the person whose life was insured and the policy number.
Jointly owned property including bank accounts and land
The person who has died may own certain items jointly with another person or persons. Jointly owned property can be owned in one of two ways, either as:
Joint tenants – where one or more people hold the property jointly and equally. If one person dies the asset passes automatically to the survivor(s). This is usually the case for joint accounts, joint insurance policies etc, but is also common when looking at land and buildings, or;
Tenants in common – where one or more people hold a share of the property. The share does not have to be equal and the owner of the share can pass their share to someone else for example through their Will. This type of ownership often relates to business and land and buildings where co-owners have chosen to own the property in specific shares.
If the person who died owned items as a joint tenant, then their share passes to the other owners in equally (so the value is divided equally between the remaining joint owners). The share does not form part of their estate but the value of their share will be included in any inheritance tax calculation. For example where a property is owned as joint tenants by two people the value of one person’s share will be 50% of the value of the whole.
As a tenant in common the person’s share will be decided based on any document that has been correctly signed and witnessed, called a Deed. In the absence of a deed then it is presumed that the shares of the tenants in common will be equal. The person’s specific share is valued and included in their estate value and in the inheritance tax calculation.
Stocks and shares, PEP’s, ISSA’s, TESSA’s, Unit Trusts, Bonds & Gilts
Any stocks and shares can be listed or unlisted. To be listed they will need to be shares in listed companies, either on the London Stock Exchange or another recognised Stock Exchange abroad.
You will need to locate the share certificates to obtain the share certificate numbers. You may find share certificates amongst the person’s belonging’s, or they may have held share certificates at their solicitor, an accountant or their bank.
If you locate older certificates amongst the person’s belongings you may find that the shares have been transferred to another company now. The company may have been taken over or merged with other organisations. It can be confusing trying to work out which company the shares actually belong to!
If the person who died had a stockbroker or a fund manager it is best to contact them and ask for a probate valuation. There will usually be a fee for this, which can be deducted from the estate.
You can check the share values yourself, although it can be complicated. Not only the closing share price on the day the person died is needed, but also any dividend values and interest that have been received on the shares are also required. Valuing dividends can be complicated so it is advisable to obtain some professional help with this.
If you wish to value the shares yourself, you can compile a list of all the shareholdings, taken from the share certificates and then check the on-line London Stock Exchange daily official lists: http://www.londonstockexchange.com/products-and-services/reference-data/valuation-data/validation-data.htm or financial websites such as Google Finance or Yahoo Finance.
If there is a larger portfolio then it would be advisable to find a stockbroker who will value the shares for you. Stockbrokers can be found on the London Stock Exchange website here: http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/tools-and-services/find-a-broker/locate-a-broker-search.html
The value of the shares will be the closing price on the day the person died or the closest working day to the date they died. The price per share is then multiplied by the number of shares the person held to work out the total value.
You will often find two prices quoted for the date the person died. The lower is the bid price and the higher is the offer price. If this is the case then a different calculation is required.
In this situation, you need to find the ‘quarter up’ price to calculate the share value. First, you work out the difference in the two prices quoted. Once you have the figure you need to calculate a quarter of that difference. This figure is then added to the lowest figure. The final figure is then multiplied by the number of shares held by the person in that company, to obtain the value of the shares.
If you think that the deceased person owned shares but you can’t find the share certificates or evidence of ownership, then you should contact their stockbroker, solicitor or accountant. If an accountant was preparing the deceased’s annual tax return their records should include details of any shares they owned.
If you believe that shares were held in a specific listed company then you should contact the registrar of that company.
If the person had unlisted shares, shares in a private company that do not trade on the stock exchange and can’t be bought by the public, then you will need to contact the Company secretary or the accountant at the Company, for a valuation of the shares on the date of death.
If once you have valued any shares or you locate further shares after the Grant is applied for you must inform the Probate & Inheritance Tax helpline here: https://www.gov.uk/government/organisations/hm-revenue-customs/contact/probate-and-inheritance-tax-enquiries
If on the other hand any shares are sold within a year of the death at a loss, you may be entitled to claim back any tax that was previously paid on the valuation at the date of death. You would need to make the claim on an IHT35 form – Claim for Relief – Loss on sales of shares.
To value PEP’s, ISA’s, TESSA’s and Unit Trusts you should contact the person’s fund management company, who look after that particular investment
Government bonds or gilts are valued in a similar way. The value that you need is the value on the date the person died. The Computershare website at the UK Debt Management Office can assist you: https://www-uk.computershare.com/investor/faqs2.asp?bhjs=1&fla=0&category=%7B14657897%2D3E31%2D48FC%2DA98B%2DA5AB8090AA60%7D
Property and land
Any land, including farm land, woodland, buildings, lock-ups and business property as well as any land over which the person had any rights, such as fishing rights, will have to be valued. The values must be included in the inheritance tax calculation.
The value that is needed is the open market value or the value that a willing buyer would most likely have paid on the open market had they bought the land on the date the person died. The fact that a particular buyer would have paid a premium for the property at that time, is irrelevant.
For most residential property, it will be adequate to provide a valuation based on the prices paid for that type of property, in that area, on the date the person died. This could be as simple as providing evidence of what price similar properties have fetched, looking at house sales at the time of death. Probably a more accurate way would be to obtain about three estate agent valuations.
The estate agent valuations must state that this is a probate valuation (an open market valuation for the date the person died). The valuation should also indicate if there are any reasons for a value being above or below the average in the area for this sort of property. This could be due to the property being in a poor state of repair, for example or it may be a property ripe for development.
If you have a range of figures from estate agents it is probably best to pick a value in the middle of the range. Any valuation you take should be able to be justified to the District Valuer, if needs be. The District Valuer considers the valuations submitted with inheritance tax forms and may query a valuation, if they believe it is too low.
Another method of valuing the property would be to obtain a professional valuation or chartered surveyor’s report. This will ensure that a property is not over valued and therefore does not attract more inheritance tax than is necessary. A professional valuer will charge to provide their report but it may worth considering this expense, particularly if the property has specific issues, or additions making it stand out from other similar properties or if there are development opportunities that could significantly affect the value. HMRC are also more likely to accept a professional valuer’s opinion if there were queries over the likely open market value.
If the property includes, for example, a farm, woodland or potential development land, then it is important to obtain a professional valuation. You will be responsible for the payment of the professional valuer’s fees, but you will be able to claim the fees back from the estate.
There are also certain tax reliefs available for business property, agricultural land and woodland, depending on how the property is used. The reliefs available may reduce the inheritance tax due. It is advisable to obtain specialist advice on the available reliefs.
If the property is sold soon after the Grant of Probate is issued, for a different figure from the tax calculation then an inheritance tax recalculation may be appropriate.
If the property is sold for considerably less than the valuation used in the tax calculation forms, in the four years following the death, then it may be possible to claim a part refund of tax paid in relation to the property, from HMRC.
If the person who died owned the property jointly then you will need to calculate the value of their share. This will depend on how they jointly owned the property and whether they had a specific share or not. See jointly owned property above (link).
You will also have to consider whether the person who has died had an interest in possession. This occurs where someone lives in a property but does not pay rent and the property is owned by someone else. If a partner owned a property share and left their share to their children for example, but the surviving partner lived at the property until they died, then the whole value of the children’s share and the survivor’s share are included in the estate and included in the inheritance tax forms, when the survivor dies.
Valuing businesses is similar to valuing land as the valuation must be based on the open market value. This is the value that the business interest might reasonably fetch if it was sold on the open market to a willing buyer at the date of transfer, or in this instance the date the person died.
Unless the business interest is very small, it is always advisable to obtain a professional valuation. The valuation is probably best obtained from the accountant of the business.
For larger businesses HMRC will want to see the prepared business accounts to the date of the death. It will be necessary to send all supporting documents to the Probate Registry together with the Inland Revenue account. Supporting documents will include the last three years accounts for the business, together with any formal documents, such as a Partnership Agreement.
If the person who died benefitted from a trust when they died, it is important to include certain aspects of the trust in the estate and inheritance tax calculation.
You will need to know whether the person was only entitled to the income from the trust or whether they were also entitled to the asset (the capital) and the income.
An interest in possession mentioned above under property and land, would be included as a trust.
Trusts can be complicated and it is always advisable to seek professional advice when dealing with an estate where trusts are involved.
The Probate and Inheritance Tax Helpline on 0300 123 1072 may assist you. The helpline is open from 9am to 5pm Monday to Friday (closed on bank holidays).
In addition, you will find further information in the HM Revenue & Customs Inheritance Tax Manual which you will find here: https://www.gov.uk/government/collections/hmrc-manuals
Valuing assets held in another country would be similar to the way you would value UK assets. Banks and savings accounts will need to be contacted with an official copy of the death certificate and the account details.
Land and buildings will require local valuations from an appropriate valuer, located where the land is.
Any valuations will need to be quoted on the relevant inheritance tax and probate forms in pounds Sterling, so any necessary conversion of the currency will have to be shown. The currency exchange will be based on the exchange rate on the date the person died.
Care is needed when dealing with foreign assets. The laws governing the assets in the country they are held and Inheritance Rules for the country will be relevant. Some countries have different inheritance laws, for example there may be rules as to who can inherit certain assets, irrelevant of what a person has stipulated in their Will. Some countries may insist on the equivalent of the Grant of Probate being obtained in their country as well, before any assets can be dealt with.
It is recommended where there are foreign assets and you are unsure how they should be dealt with that professional advice is sought.
Gifts made in the last seven years before the date of death
When valuing the estate, the personal representatives will need to find out whether any gifts or transfers were made in the seven years before the person died. The gift may be in the form of money or could be a personal possession or property of some value, that was given or transferred to another person, by the person who has died.
These gifts are called potentially exempt transfers. If the gift was made before the seven-year period before death, then the asset value is not included in the estate. If it was made in the seven years before the person died then the valuation must be included and may affect any inheritance tax due from the estate.
If the person died within seven years of making the gift and its value is less than the inheritance tax threshold, then the value of the gift will be added to the estate and any resulting tax liability paid from the estate.
On the other hand, if the gift has a value, more than the inheritance tax threshold, then Inheritance Tax may be due on the value of the gift itself. This will need to be paid by the beneficiary of the gift, or by the estate.
If the gift was made in the three to seven years before the death and the asset was worth more than the inheritance tax threshold, then the amount of inheritance tax due will be reduced or ‘tapered’ using a sliding scale. This is known as taper relief and you can find further information on this here: https://www.gov.uk/inheritance-tax/gifts
Certain gifts will always be exempt and therefore would not need to be included in the estate valuation. These would include gifts between spouses or civil partners, gifts to most charities, UK political parties and National Institutions for example national art galleries or museums.
Everyone also has an annual allowance that will be exempt from any tax. Currently, (as at April 2017) the personal annual exemption is £3,000. Any amount up to the maximum £3,000 that has not been used from the previous year, can be carried forward and added to the person’s year of death allowance.
In addition, certain other exemptions are allowed for specific gifts. These include:
• wedding or civil ceremony gifts of up to £1,000 per person (£2,500 for a grandchild or great-grandchild, £5,000 for a child)
• normal gifts out of your income, for example Christmas or birthday presents – you must be able to maintain your standard of living after making the gift
• payments to help with another person’s living costs, such as an elderly relative or a child under 18
• gifts to charities and political parties
You can also give any number of small gifts up to a value of £250 per person, as many times as you like in a year, provided the gift is not to the same person who is also receiving one of the other exemption gifts above.
HMRC will need to see details and documented proof of any gift made, where an exemption is being claimed.
To complete the valuation to be included in the inheritance tax forms the value of the gift when it was transferred or given is needed, not its current value.
Not sure you’ve found all the assets?
If you believe there may be assets that you do not have information on, these organisations may be able to assist:-
The British Bankers Association (BBA) https://www.bba.org.uk/ and the Building Societies Association (BSA) https://www.bsa.org.uk/ to check for missing accounts.
The Association of British Insurers (ABI) https://www.abi.org.uk/ for missing insurance policies.
National Savings & Investments (NS&I) https://www.nsandi.com/ for a range of government savings accounts and investment schemes including premium bonds and direct saver accounts.
The Pension Service https://www.gov.uk/contact-pension-service for state pensions.
The Unclaimed Assets Register https://www.uar.co.uk/ which is a service provided by Experian, a global information services company, to help people find missing assets including pensions, life policies, unit trusts and share dividends and financial providers.
The government website has useful advice on valuing someone’s estate here: https://www.gov.uk/valuing-estate-of-someone-who-died
Debts and liabilities – money the person owed at the date they died
Not only does the estate’s assets need valuing, as the personal representative you are also responsible for ensuring that any debts or liabilities owed by the deceased are settled. If they are not dealt with and any debts and liabilities paid. As personal representative, you are expected to ascertain any debts and liabilities that may be due from someone’s estate. If you do not carry out this duty correctly then you can be personally liable for any unsettled debts and liabilities, even after the estate has been distributed.
Most debts and liabilities will be easily identifiable in someone’s paperwork as you go through their belongings. They will often include but are not restricted to the following:-
Household bills – all utilities, telephone and mobile phones. The relevant companies will need to be contacted and direct debts cancelled, if needs be. Alternative methods of payment will need to be set up until the property is sold or transferred.
Council Tax bills – the Local authority will need to be contacted. If Council Tax was paid in advance then there may be a rebate due to the estate. An empty property will be exempt from Council Tax for a period of six months, after which it will become payable again. If the property is still lived in the local authority will still need to be contacted so their records can be amended and any reduction, such as single person allowance can be applied.
Loans and overdrafts – contact the relevant loan provider and the person’s bank for further information. Interest should stop being applied from the date of death.
Credit cards and store cards – The relevant provider will need to be contacted. It is often sensible to check the last bank statements to check what payments have been made and check these against any information you receive from the credit card or store card provider. They do sometimes get it wrong particularly where payment centres may not be at the same office where statements are sent from! The provider should stop applying interests to the account, from the date the person died.
Mortgage – the mortgage lender must be contacted to obtain the date of death amount outstanding against any property. The mortgage amount will be deducted from the value of the property. If the property is jointly owned, only the deceased’s share of the mortgage will be deducted from their share of the property value.
Hire Purchase agreements – you will need to contact the provider for confirmation of any amount outstanding on the agreement. The asset itself will need to be valued too and included in the estate valuation.
Debts to family or friends – may also be due from the estate. However, any loans the person received from friends or family would have to be evidenced. Evidence must be in a written or verbal agreement detailing the repayment terms, or there needs to be proof that the person who died was making repayments.
Funeral costs – the cost of the funeral and reasonable mourning expenses will be a liability of the estate and therefore payable from the estate. Mourning expenses can include, the flowers, the wake and a headstone, amongst other things.
If you are unsure what debts and liabilities the person who died had it would be a good idea to place what is known as a section 27 notice in the London Gazette and the local newspaper to where the person lived and any local newspaper where they owned a business. If you are an executor the notice can be placed as soon as the person has died. As an administrator, the notice will only give you protection if it is taken out once you have received the Grant. This is because the administrator’s authority comes from the Grant, not the Will as with executors. There is no need to panic that you may not be able to value all the debts and liabilities until once the inheritance tax forms have been completed. A corrective account can always be prepared which, if approved by HMRC will allow reimbursement of any overpaid inheritance tax, if necessary.
A section 27 notice gives notice to any creditors that they may have a claim over the deceased’s estate. The notice must provide specific information concerning the deceased and include the personal representative’s details or their solicitor so any creditors know who to contact. The notice must be visible in the papers for a consecutive period of 2 months. If after the 2 months the personal representative have heard nothing, they will be protected from being held personally responsible for the debt that comes to light at a later point. The creditor would then have to pursue the beneficiaries of the Will for any outstanding sums due to them.
If notices have not been placed the personal representatives can be held personally liable for any claim that may come to light, even if they have already distributed the estate to the beneficiaries. The personal representative would have to pay the debt and then pursue the beneficiaries themselves to be reimbursed. Here is a link to the London Gazette information on section 27 notices. The article is quite technical but you may find it helpful https://www.thegazette.co.uk/wills-and-probate/content/299 Here is the link to the London Gazette on how to place a notice: https://www.thegazette.co.uk/place-notice
The format of the notice will be the same for the deceased’s local newspaper and if needed, any local newspaper to any business they owned or co-owned. The cost of the notices will be the personal representative’s responsibility, but the cost can be claimed from the estate.
It is also possible to obtain executors insurance to protect the personal representatives from a later claim from creditors or missing beneficiaries. It is not always necessary but may be worth considering particularly if it is difficult to establish exactly what debts are due or you are having difficulties locating beneficiaries or family members who are entitled to inherit. It is another option that may afford protection, where needed, but not usually necessary where the deceased’s affairs and family are well known to the personal representatives.
Once you have gathered all the necessary information together concerning the person’s assets and liabilities you will then need to complete the inheritance tax form.
You can find a guide on ‘Which Inheritance Tax forms do I use?’ here (link)
Please note that information which we provide in our guides is in outline for information purposes only. The information is not a substitute for advice from a professional adviser. We cannot guarantee that information provided by our guides will meet your individual needs, as this will depend on your individual circumstances. You should therefore use the information only as a starting point and always seek professional advice if you are unsure.