When someone passes away, if they left a Will they will have nominated an executor (if they didn’t leave a Will the next of kin will be able to deal with the estate). It is the executor’s job to sort out the assets and liabilities of the deceased. In a nutshell, this means getting in the assets and paying/discharging the liabilities.
But before you can do this you will need to value the estate. This means valuing any money, property, and possessions belonging to the person who has passed away. This valuation will be used to determine if inheritance tax needs to be paid or not. In this article, we will be outlining the four steps you need to take to value an estate.
Get the details.
To work out the value of the estate, you will need details of all assets e.g. bank accounts, savings accounts, property, etc. You will need details of all debts e.g. utility bills, loan repayments, mortgages, etc. and all significant gifts they gave away in the last seven years before they died. This means you will have to write to the asset holders and ask them for the value of the asset at the date of death. You are trying to ascertain the value of the estate at the date the deceased person passed away. This is an important point as some assets will increase in value, e.g., a bank account gaining interest.
Money in a joint bank account or owned jointly will automatically pass to the other owner or owners, half of the money will need to be added into the calculation for the estate.
Tip: To value non-monetary assets (cars, antiques, etc.) it is recommended that you use a professional valuer if the asset is worth more than £500.00. If the deceased left a lot of belongings such as furniture, jewellery, etc. you can hire a professional valuer who will value everything at once and provide you with a succinct report.
Tip: You will need to get three valuations of any houses from three different estate agents and then use the average to give you a figure for the property.
Total up the assets and the debts. Add all of the assets together to reach the total asset figure and total up all of the debts to reach the total debt figure.
To find the value of the estate, you will need to subtract the debts from the assets. Take the total debt figure away from the total asset figure to be left with the final value of the estate.
Assets – Debts = Estate value.
If the estate value is over £325,000.00 then usually you will need to pay inheritance tax. For more information on when and how to pay inheritance tax.
Regardless of whether or not you need to pay inheritance tax if you need a grant of representation you should fill out the right inheritance tax form. This needs to be completed to obtain the Grant.
If there is no inheritance tax to pay, but you need a grant, then you need to fill out form IHT205. If there is any tax to pay you will need form IHT400.
Send in the forms when you apply for the grant of representation. You should send your application to your local Probate Registry.
As you can see, there are four simple steps to follow to value an estate. However, just because the steps are simple does not mean the process will be easy.