Before an estate can be administered, someone has to work out what it is actually worth, and this is one of the tasks executors find most daunting. If you are searching ‘Probate valuation: how is an estate valued for probate’, the answer, in simple terms, is that a probate valuation establishes the value of everything the deceased owned, less what they owed, as at the date of their death. It underpins the application for the grant, determines whether any inheritance tax is due, and forms the basis of the accounts eventually presented to the beneficiaries. This article explains how a valuation is carried out and why getting it right matters.
To speak to our experts, please call us free of charge on 0800 988 3674 or Make A Free Online Enquiry.
What Is A Probate Valuation?
A probate valuation is a snapshot of the estate taken at the date of death. It records the value of each asset the deceased held, together with each debt, so that the net value of the estate can be calculated. The figure produced is not a rough estimate or an insurance value. What is required is the open market value, meaning the price the asset would reasonably fetch if sold on the open market at that time.
That distinction matters because the valuation is used for official purposes. HM Revenue and Customs relies on it to assess inheritance tax, and the Probate Registry relies on it to process the application. An inaccurate valuation can therefore cause real problems later.
What Assets Need To Be Valued?
Most estates are made up of several different types of assets, and each is valued in its own way.
Property is usually the largest single item. Bank and building society accounts are valued at the balance on the date of death, including any interest accrued. Investments such as shares, bonds, and unit trusts are valued using the prices on the date of death. Personal possessions, sometimes called chattels, include furniture, jewellery, vehicles, and other belongings, valued at what they would realistically sell for rather than what was paid for them.
How Is Property Valued For Probate?
Because property is usually the most valuable asset, and the one HM Revenue and Customs is most likely to examine, it deserves attention. For a modest estate that clearly falls below the inheritance tax threshold, valuations from two or three local estate agents may be sufficient. Where inheritance tax is likely to be payable, or the estate is close to the threshold, a formal written valuation from a chartered surveyor, prepared specifically for probate purposes, is the safer course.
The reason is that HM Revenue and Customs can refer a valuation to the District Valuer, who may challenge a figure thought to be too low. A professional valuation obtained at the outset gives the executors a defensible basis for the figure they have used and reduces the risk of a later dispute, penalty, or interest charge.
What Debts And Liabilities Can Be Deducted?
An estate is valued net, so debts owed by the deceased are deducted from the total. These commonly include an outstanding mortgage, credit cards, loans, unpaid utility bills, and income tax owed up to the date of death. Reasonable funeral expenses can also be deducted.
Keeping careful records of these liabilities is important, both to arrive at the correct net figure and to demonstrate to the beneficiaries how the estate has been calculated. Overlooking a debt can lead to the estate being overvalued, while failing to identify a creditor before distributing the estate can leave the executors personally exposed.
Why Does An Accurate Probate Valuation Matter?
The valuation is not merely an administrative step. It determines whether inheritance tax is payable and how much, and tax is charged on the value of the estate above the available allowances. An estate that is undervalued may attract a challenge from HM Revenue and Customs, with interest and penalties, and one that is overvalued may result in more tax being paid than was necessary.
The valuation also protects the executors. They are personally responsible for administering the estate correctly, and a sound valuation, properly documented, is part of showing that they have done their job with due care. It also gives the beneficiaries confidence that the estate has been handled openly and accurately.
What Happens If Asset Values Change After Death?
Values can move between the date of death and the point at which assets are actually sold. Where shares or property are sold within certain periods after death for less than their probate value, it may be possible to claim relief and recover some of the inheritance tax paid. Conversely, a sale at a higher figure may have capital gains tax implications for the estate. These are technical areas where advice is worthwhile, because the reliefs are valuable but must be claimed correctly and within time limits.
How Can Bartletts Solicitors Help?
Valuing an estate accurately takes time and judgement, and mistakes can be costly. Our wills and probate team can guide you through the valuation, help you obtain the right professional valuations where they are needed, and make sure the figures are correctly reported to HM Revenue and Customs and the Probate Registry. Where reliefs may be available, we can advise on claiming them.
To speak to our experts please call us free of charge on 0800 988 3674 or Make A Free Online Enquiry.
