When a loved one dies, their assets and belongings, known as their estate, need to be sorted out and shared according to their wishes (found in their Will) or legal requirements. This is known as probate. An important step in the probate process is the probate valuation.
What Is Probate Valuation of Estate?
The probate valuation of an estate is the sum total value of the deceaseds assets, minus any debts in their name.
The gross value of the estate is the value of all assets before debts, funeral expenses and other deductions are taken away.
The net estate value is the gross value minus debts, funeral expenses and other deductions, before Inheritance Tax exemptions have been applied.
What Is The Process Of Valuing An Estate for Probate?
The probate valuation of estate process is headed up by the executor of the will and goes as follows:
First you need to identify all the assets left behind by the deceased. This includes not just financial assets like bank accounts, savings, wages, business assets and pensions but also property, household goods, and personal items.
Next, take stock of any outstanding debts. This includes bills, mortgages, credit card accounts, loans, care homes or agencies fees outstanding, and even funeral costs. This is an important step because any debts (sometimes referred to as liabilities) must be settled before assets are distributed among beneficiaries.
Reach out to organisations like banks and lenders and ask them for the value of each asset and debt as of the date of the person's passing. For mortgages, it's also a good idea to check whether they require ongoing mortgage payments while you're in the process of applying for probate.
Property and other possessions should be valued at the price they might get if they were sold on the open market at the time of death.
Estimating the Estate's Value
To figure out the total value of the estate, you need to add up all the assets the person had when they passed away. This includes any valuable gifts they gave in the 7 years leading up to their death and the value of any trusts they were part of.
This total value is what helps determine if any Inheritance Tax needs to be paid. You can use HMRC's online Inheritance Tax checker tool to get an approximate value of the estate and help you decide whether any Inheritance Tax is likely to be due or not.
Reporting the Value of the Estate
Reporting the value of the estate can get a bit complex.
If Inheritance Tax is applicable, you'll need to provide a comprehensive breakdown of the estate. However, even if no tax is due, you might still have to submit detailed information in specific situations. For instance, if the deceased gave away more than £250,000 in the 7 years before their passing or had foreign assets worth over £100,000, you'd need to provide full details.
However, if there's no Inheritance Tax due and the estate qualifies as an 'excepted estate,' you won't have to provide a full breakdown of its value.
Valuing An Estate For Inheritance Tax
The purpose of an estate valuation is to determine whether any Inheritance Tax needs to be paid. Any estate under the threshold limit (£325,000) is not required to pay Inheritance Tax.
An estate may also be eligible for an additional tax free allowance of £175,000 if the home of the person who died is being passed to their children or grandchildren (residence nil rate band).
Inheritance Tax can be quite complex in certain cases, depending on what’s in the estate and who is inheriting from it. In some cases, other exemptions may apply. If in doubt, it's always advisable to seek legal help and potentially the advice of a financial advisor, who can explain where you stand in your specific case.
Why Is Estate Valuation for Probate Important?
An estate valuation is required to work out if Inheritance Tax is due when someone dies and calculate potential Capital Gains Tax on assets. This must be done before applying for probate, if you need it.
Also, if a person dies with debts in their name, an estate valuation makes it possible to pay them off and distribute any remaining assets according to the deceased’s will or the law.
When Do You Value An Estate For Probate
You cannot get a grant of probate or grant of letters of administration until you have completed an inheritance tax form. And you can’t complete those forms and pay the Inheritance Tax that is due until you know the value of the estate. Therefore this is one of the first jobs an executor must do to start the probate process following registration of the death.
How Long Does It Take To Value An Estate?
Valuing an estate can take anywhere from a few weeks to several months depending on the size and complexity of the estate. If there are trusts involved or complicated issues arise in locating financial assets, this can add more time to the process to ensure the final valuation is reflective of the estate in question.
Factors Affecting Estate Valuation
Estate valuation can be a complex task, as it involves determining the value of various assets that make up the deceased's estate including ‘real’ property, personal property, joint assets, gifts, and financial assets and liabilities.
The value of a property is what it might reasonably get sold for on the open market. When it comes to valuing property such as houses or land, the location, its condition, and the current trends in the property market all influence its value.
While you can get a general idea of a property's value through online research, HMRC requires that you get a professional valuation for any assets worth £1,500, unless the gross value of the estate is less than £250,000. With that in mind, it’s wise to get a local estate agent to provide a valuation or, for higher value or complex properties, a valuation from The Royal Institute of Chartered Surveyors.
In some cases, HMRC might request evidence to support the valuation. If HMRC believe the valuation provided is too low, they can impose financial penalties.
Personal Property (Possessions)
Personal possessions, such as jewellery, artwork, vehicles, furniture, clothing, electrical goods and family heirlooms, sometimes hold sentimental value beyond their monetary worth. Therefore, it can be difficult to know where to start with this part of a probate valuation.
If the deceased had antiques or collectibles, their value can vary widely depending on age, condition and market trends. There is no obligation to get a formal valuation if personal property is expected to be worth less than £1,500. Rather a reasonable estimate can be given based on publicly available data, like online research. However, it is recommended to seek a professional valuation for specialist items where it is unclear on their value.
Financial Assets and Liabilities
Financial assets and liabilities, such as bank accounts, investments, and outstanding debts, play a significant role in estate valuation. It's crucial to gather all relevant financial documents, including bank statements, investment portfolios, and loan agreements, to determine the deceased's financial standing accurately.
Accurate record-keeping is paramount in this phase of probate valuation. Having clear documentation of financial assets and liabilities ensures that nothing is overlooked during the valuation process, and all debts and assets are accounted for correctly.
Organisations you might want to consider searching when undertaking a probate valuation of estate include:
Companies they may have held shares in
National savings and investments
ISAs, shares, investments or assets in trust
Often, when people are married or in a relationship they own things together. These are called joint assets. There are certain rules around valuing joint assets, and they largely depend on whether they were owned as joint tenants or tenants in common.
Assets of joint tenants automatically pass on to the other owners if one of them dies. If the asset was owned as a joint tenant with the person's spouse or civil partner, then the value of the asset should be divided by 2.
If the asset was owned with other joint tenants then the value is divided by the number of owners and 10% taken from the share of the person who died. The final value is the total share of the deceased minus 10%.
For joint bank accounts, the remaining money should be divided by the number of account holders.
Tenants in common or people who are cohabiting do not have the same legal rights as those who are married or in a civil partnership. Jointly owned assets do not pass to the surviving tenant in common automatically. Instead, if the asset is jointly owned as a tenant in common, the value is based on the deceased’s share.
Gifts made in the last 7 years before the person died over the £3,000 annual exemption count towards the value of an estate. If the deceased continued to benefit from a gift before they died, this also counts towards the value of an estate.
Gifts can be money, furniture, jewellery, artwork or antiques, houses, land or buildings, stocks and shares listed on the London Stock Exchange, unlisted shares held for less than 2 years before the person’s death.
You can estimate the value of a gift by finding the rough value of it at the time it was made or the realistic selling price of the gift if the deceased continued to benefit from the gift after giving it away.
If a person made gifts to charities or political parties, there’s no need to pay Inheritance Tax on them.
Where To Look When Undertaking a Valuation of Estate
Finding everything a person owns and owes can be quite a big job. A good place to start is to make a list of known assets and property. A good starting point may be to check the person’s will or insurance documents for clues. Other places to look and things to consider include:
Other properties or land
Money in banks, building societies or ISAs
Cash in the home
Stocks and shares
Household and personal items
Money they’re owed from employers or refunds
Payments when they died (i.e. death benefit or life insurance)
Often assets are spread out and require some research to uncover. It’s also important to take into account that items may have been given to family members for safekeeping or as a gift before the person died.
How To Value An Estate When Someone Dies Without A Will
When someone dies without a will (intestate), their estate is distributed according to the rules of intestacy. This takes into account the value of the estate and how many surviving relatives there are.
Current intestate rules regarding estate value state that if a person was married or in a civil partnership when they died and their estate is valued at less than £270,000 then everything goes to their spouse or civil partner. If the value of the estate is over £270,000 and the deceased leaves behind children or grandchildren they could also be entitled to some of the estate.
When someone dies without a will, the value of their estate is calculated in the same way. What differs is how the assets are divided between surviving relatives, spouses and/or civil partners.
Online Resources for Probate Valuation
In today's digital age, a wealth of information is readily available at your fingertips, and it can significantly aid you in determining the value of assets quickly and efficiently. Here, we'll explore various online tools and platforms that can make probate valuation more manageable:
How They Help
Property Valuation Websites
Several websites offer property valuation tools that can provide estimated values for real estate. These tools consider factors like location, property size, and recent sales data. While they provide a ballpark figure, remember that professional appraisals are usually necessary for accurate real estate valuation.
On The Market, Zoopla, YOPA, Right Move
Financial Asset Search companies
A number of companies offer comprehensive services that cover hundreds of financial organisations and databases. These can be a quick way to find lost or unknown assets that are due to an estate.
The National Will Register Inheritance Data Financial Asset Search, Inheritance Data, Estatesearch, My Lost Account
Through the official government website you can search for how much a property sold for and search UK house price averages by region, county or local authority. HMRC also offers guidance on valuing assets for inheritance tax purposes.
Gov.uk, HM Land Registry, HMRC, Companies House
Banks and Financial Institutions
Many banks and financial institutions provide online access to account information.
Barclays, Royal Bank of Scotland, Lloyds Banking Group, Santander, Nationwide
When a person dies you should establish the value of their pension plan on the date of death, whether the plan has been fully crystallised, whether the plan had received a transfer value from another pension arrangement within the last two years, details of any nominations, and whether there have been any excessively large contributions made in the 2 years prior to death.
Find pension contact details through the Government website
There are several fee online resources and tools to find how much a car or other vehicle is worth. Normally, you only need to vehicle registration and average mileage to find out how much a car is work.
Auto Trader, Parkers, What Car, We Buy Any Car, Confused.com, Cazoo
Always cross-reference the information you find online with official documents and records. Online data can sometimes be outdated or inaccurate.
While online resources can be valuable, they are not a substitute for professional guidance. Consult with a probate solicitor or other experts when making significant valuation decisions.
Getting Help With Probate Valuation From A Solicitor
In the complex and often emotional journey of probate, one person can make all the difference: a qualified probate solicitor.
A wills, trust and probate solicitor is a bridge between the technical aspects of estate valuation and the emotional side of this process. They can provide not only legal help, advice and advocacy but also emotional support.
At Lawhive, we can help you find the best wills, trust and probate solicitor in less than 5 minutes and provide you with a fixed-fee quote for their services. Our network of solicitors include some of the very best in the country, and in many cases we can get you working with them on your case the same day. To get started, simply tell us about your probate case and we’ll take care of the rest.