When someone dies in Scotland the executor of the estate has various duties to perform, including valuing all the goods, possessions, cash and property that make up the estate. This valuation is needed for estates for both the Sheriff Court when applying for Confirmation and for HMRC when making a declaration of the value of an estate so that any inheritance tax liability can be calculated.
The executor needs to get Confirmation from the local Sheriff Court so that they have the legal authority to deal with all the affairs of the estate such as collecting the assets, paying any debts and distributing any legacies.
Before getting Confirmation, it is necessary to deal with HMRC and to pay any inheritance tax due. Inheritance tax must be paid on estates with a net worth of £325,000 or more at a rate of 40% on everything above the £325,000 threshold. The 40% rate can be reduced to 36% if at least 10% of the value of the estate is bequeathed to charity.
For the purposes of both Confirmation and HMRC, all of the estate’s assets must be valued at their open market value at the time of the death of the deceased. Obviously, cash in the bank or building society has its face value but other assets may be more difficult to value and will require the assistance of a professional.
In the case of land and property, you should seek the advice of an estate agent or a surveyor. For general house contents, it’s best to find a professional who has a track record of making valuations. For valuable items such as jewellery, artworks, collectibles or antiques you should seek out a specialist in the appropriate area. HMRC advise that any single item with a value of more than £500 should valued by a competent professional.
If you are having difficulty in getting an item valued, you are allowed to make an estimate of its worth. However, this cannot just be a guess but must be a reasonable estimate. You must make it clear that the value is your estimate.
It is always best to get items professionally valued as HMRC can challenge values they believe are too low and this can cause lengthy delays in getting Confirmation from the Sheriff Court and in paying out inheritances to beneficiaries.
With property, you may decide to get more than one professional valuation. If the valuations have a considerable variation, then you should report a value that is in the middle range between the highest value and the lowest.
Once you have calculated the gross value of the estate, you should then deduct any liabilities and debts the estate has. The net worth of the estate is the value of the assets less the amount of the liabilities.