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How to value an estate for HMRC

You actually need to value the estate of a deceased person both for HMRC and to obtain probate. HMRC need to know the value of the estate in order to decide if inheritance tax is due to be paid, and you will also need to present the valuation to the Probate Registry when you apply for probate, or the Grant of Representation as it is properly called.

It is the executor of an estate, who should have been named in the will that has responsibility for valuing the estate. In the case of someone who has died intestate, that is without a will, then someone, most commonly a close family member, will have to take on the role of administrator. He or she will then have the same responsibilities in relation to the estate as the executor does.

The first thing you need to do when valuing an estate is to list all the property and possessions that form part of the estate. The value of each item is the market value when the person died. HMRC recommends that a professional valuer such as an estate agent or a chartered surveyor for land and property. For other items such as household goods and personal possessions such as jewellery and antiques you can estimate a value yourself if that is below £500. For such items that have a value of more than £500 HMRC again recommends that you should use someone with professional expertise to give a value.

HMRC gives this list of all the principal things you need to include as assets:
– money in a bank or building society account
– property and land
– personal belongings, e.g. jewellery
– furniture
– cars
– shares
– trusts
– pensions that include a ‘lump sum’ payment on death
– a payout from a life insurance policy
– jointly owned property, bank accounts or other assets

Once you have a total value for all the assets, you then need to calculate any liabilities that the estate has. These may include outstanding household bills, bills for goods and services, mortgages on property and credit card balances. Once you have a sum total for the liabilities, you then deduct this from the total of the assets to arrive at a net worth figure for the estate. You can include funeral costs in the deductions, but not professional fees if you have engaged a solicitor or accountant to help you with administering the estate.

You should take great care to accurately calculate the value of the estate. If HMRC decide to challenge your valuations this can cause lengthy and unwelcome delays to the whole probate process.

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