How to Value an Estate for Probate
When a loved one dies, their estate needs to be valued. Putting a valuation on an estate can seem complex, especially during what is often an emotionally difficult time. But when you break it down, it’s a step-by-step process that involves assessing everything a person owned, such as property, bank accounts, possessions and debts, at the time of their death. The valuation process is important for probate, which is the legal authority to deal with a deceased person’s assets. It establishes whether inheritance tax is due and how much should be paid, and assets should be valued as accurately as possible.
At Clough & Willis, our solicitors have significant expertise in both probate matters and property conveyancing. Here, we explain how to value an estate for probate in simple steps, to make the process as easy as possible during what will be a difficult time for family and friends of the deceased.
What does valuing an estate for probate involve?
Valuing an estate means calculating the total worth of everything the deceased owned, minus any outstanding debts. This includes tangible assets, such as property and vehicles, and intangible ones, like savings, shares and pensions. Jointly owned assets are also included, though they’re often treated differently for inheritance tax depending on ownership terms.
If the value of the estate exceeds the inheritance tax threshold, also known as the nil band rate (currently £325,000 in the UK), tax will need to be paid. The valuation will also help to determine whether capital gains tax applies once assets are sold during the probate process.
While some assets are straightforward to value, others may need professional input.
Step-by-step guide to valuing an estate for probate
Step 1: Identify all assets
Begin by creating a list of all the assets the deceased person owned. This includes bank accounts, savings, investments, property, vehicles, business interests and personal possessions such as jewellery or artwork. Don’t forget to include jointly owned assets and foreign assets, as these must also be considered.
Some assets may be easy to value, like savings in a bank account. Others, such as shares or business assets, may need specialist advice. If the estate includes high-value items or unique assets, a professional valuation may be required.
Step 2: Value property accurately
Property is often one of the most valuable parts of an estate. Determining market value may require consulting a local estate agent or a chartered surveyor. A professional valuation gives a realistic figure based on current market conditions.
Be aware that estate agents may charge a fee for probate valuations. However, their expertise can make a difference when HMRC reviews the figures. If an estate is reportable to HMRC, it is advisable to obtain three estate agent valuations, or in some cases, a report from a RICS surveyor.
Step 3: Assess personal possessions
Personal possessions cover items like jewellery, furniture and collectibles. For high-value possessions, consider consulting auction houses or specialist valuers to determine their worth. Everyday items, such as general household goods, can usually be given an approximate valuation based on second-hand market prices. HMRC do not expect every item in the household to be valued and a notional total estimate can be submitted.
Step 4: Consider business and foreign assets
If the deceased owned a business or had interests in one, the valuation process may become more complex. Business assets need to be assessed, which could involve accountants or business valuation experts. Foreign assets, like property or accounts held overseas, also need to be valued. Exchange rates and foreign tax rules can affect the process too.
Step 5: Subtract debts and liabilities
Once you’ve identified and valued all assets, the next step is to subtract any debts. This includes mortgages, loans, credit card balances and unpaid bills. The remaining figure is the net estate value, which is used to calculate inheritance tax.
The most overlooked liability in an estate is the funeral. This can be noted as a liability of the estate irrespective of whether it has been paid by the time Probate is applied for. If it was paid by a family member, this would still constitute a debt to the estate and therefore reportable, as it would require reimbursement at a later date.
Inheritance tax and capital gains tax
No inheritance tax is due on an estate below the standard nil band rate and the rate is 40% on anything above this threshold, though exemptions and reliefs can reduce the liability. For example, if the estate includes property passed to a direct descendant, the estate may attract an additional £175,000 relief, which is offset against the property (The Residence Nil Rate Band).
Capital gains tax may also need to be considered on assets such as property or shares, which are sold during the administration period. This tax is calculated based on the increase in value since the date of death.
At Clough & Willis Solicitors, our expert team can provide you with the advice needed as to whether IHT would be payable.
Professional help in valuing an estate
While some aspects of estate valuation can be handled independently, professional help is often invaluable. Aside from chartered surveyors, local estate agents and specialist valuers providing property and item valuations, the specialist probate solicitors at Clough & Willis can clarify IHT rules, and guide you through the probate process. We can make sure you avoid errors, which can lead to disputes or penalties from HMRC.
FAQs: estate valuation for probate
Do estate agents charge for valuations for probate?
Some estate agents charge a fee for probate valuations, while others may provide them free of charge, especially if they are likely to handle the property sale. It is advisable to confirm any fees in advance. HMRC accepts formal valuations from both estate agents and chartered surveyors, provided they are accurate and reflect the open market value of the property at the date of death. Professional valuations are particularly helpful in ensuring that the figure reported is realistic and acceptable to HMRC, avoiding potential disputes or delays in the probate process.
What is the net qualifying value of an estate for probate?
The net qualifying value is the total value of the estate after debts and liabilities have been subtracted. This figure is used to calculate inheritance tax and determine whether the estate falls above or below the tax threshold.
Clough & Willis are here to help you establish an estate's value for probate
Valuing an estate for probate is a detailed process, but it’s an essential step in managing the financial affairs of someone who has died. From identifying assets to calculating tax liabilities, every stage matters. Our advice will simplify complex areas and provide peace of mind. We can deal with the full administration of the estate, including acting on your behalf apply to the Probate Registry and pay any IHT owed. Call us on 0800 083 0815, or fill in our online enquiry form to arrange a call back at a time that suits you.
