How to value an estate for Inheritance Tax

When applying for a Grant of Representation (or Grant of Probate, if there is a Will), it is necessary to notify HMRC of the value of an estate to ascertain whether there is any inheritance tax payable. To do this, the Personal Representatives (or Executors) must value the assets and liabilities of the person who has passed away. The main steps in ascertaining this is to identify the deceased’s assets and debts, which may include the person’s bank accounts, investments, life policies and business interests.

Once the institutions have been established, it is then necessary to contact the bank, the investment providers including ISAs and managed portfolios, the pension providers, NS&I (to ascertain whether there are any Premium Bonds), the share registrars to establish the number of holdings in the companies, and any Mortgage lender. It is important to ensure that you ask for the date of death balances for the accounts, as these are the relevant figures that you include in the final tax return when applying for Probate. A valuation of any property, and business holdings should then be obtained. We recommend that for properties, three valuations should be obtained, and an average figure taken for the Probate valuation.

It is also important to establish whether any assets are held jointly with another person, and if so, the same must be accounted for correctly in the paperwork.

Once the assets have been established, it is then pivotal to ensure that any debts are deducted from the estate value, which can include the funeral expenses, funeral tea, any credit cards or loans.

Once all of the information has been obtained, it is necessary to compile the same into the correct return to send to HMRC. Different rules apply depending on the nature of the assets and reliefs applied so it is important to seek specialist advice on inheritance tax, reliefs, exemptions and rates of tax to ensure that the tax return has been completed correctly.

Get in touch with our specialist team on 0800 015 0340 if you require any assistance.