How to value an Estate for Probate
Estimate the Estate’s value
You need an estimate of the Estate’s value to find out if there’s Inheritance Tax to pay.
The estate won’t have to pay tax as long as it either:
all passes to the dead person’s spouse or civil partner, a charity or a community amateur sports club
has a value below the Inheritance Tax threshold of £325,000
If the person who died was widowed or is giving away their home to their children, the tax threshold can be higher.
Whether there’s tax to pay will affect how you report the estate’s value, and the deadlines for reporting and paying any tax.
If you are unsure of how to proceed, please call the UK Probate Office helpline on contact us.
Working out your estimate
You need to estimate the ‘gross’ value of the estate. This is the value of the assets plus ‘gifts’.
Gifts are certain assets (for example cash) given away in the 7 years before the person died. There is a sliding scale that is applied for gifts over a certain value and to certain people. Some gifts are exempt (like £5000 before a wedding, from parents). Form IHT403 is used if the deceased has given away or transferred any money, property or assets.
At this stage, your estimate only needs to be accurate enough for you to know if the estate owes tax.
If you have any questions regarding gifts, please contact us
Assets
Start by listing the person’s assets – the things the person owned with a value.
These may include:
- assets held by organisations you’ve written to – such as money in the person’s bank account, pension or investments
- possessions – for example their house, jewellery, furniture or car
- payments when they died – for example life insurance or a lump sum ‘death benefit’ from a pension
Then estimate the value of each on the date the person died. Use the asset’s realistic selling price on the open market.
Include all assets in your estimate, including any left to the person’s spouse, civil partner or a charity. You won’t pay tax on these assets.
If you have any questions regarding what constitutes an asset or need Probate assistance, please contact us or email us
Valuing joint assets
Divide the value of the asset by 2 if it was owned jointly with the person’s spouse or civil partner.
For property or land shared with others, divide the value by the number of owners. You can then take 10% off the share of the person who died. In Scotland, take £4,000 off the value of the whole asset before working out their share instead.
If the person jointly owned property as a tenant in common, work out the value based on the person’s share.
Some bank accounts are in joint names for convenience only, for example if an elderly person added their child to help them with the account. When valuing the account, use the amount the person actually owned, rather than dividing by the number of owners.
If you require assistance, please contact us
Gifts
Check bank statements or contact family members to find out about gifts of
cash or other assets:
- in the 7 years before the person died if they totalled £3,000 or more per year – don’t include exempt gifts, such as those for birthdays or weddings
- at any time if they continued to benefit from a gift (for example they gave a house away but lived in it rent-free) or put a gift in a trust.
To estimate the value of each gift, use either:
- the approximate market value (realistic selling price) of the gift when it was made
- the realistic selling price of the gift when the deceased stopped benefitting from it (if they benefitted from the gift after giving it away).
If the person gave away more than £325,000 before they died, the recipients may have to pay Inheritance Tax on their gifts.
An additional HMRC form, IHT403 will normally be required, with information about these gifts.
Debts
Don’t include the estate’s debts when you estimate the gross value – but you’ll need to tell HM Revenue and Customs (HMRC) about them when you report the value of the estate.
Check for records of debts when the person died, for example:
- their mortgage, loans, credit cards or overdrafts
- ‘liabilities’ like household bills or bills for goods or services they’d received but not yet paid for (like building work, decorators, accountants)
Get the gross value of the estate
Add the assets to any gifts to get the gross value. Ignore the debts at this stage.
You can now start telling HMRC about the value of the estate.
Please contact us with any queries.
Getting help
You can hire a professional (for example licensed Probate practitioner) to help with some or all of the tasks involved with valuing an Estate and taking out the grant of Probate.