How Do I Find Out The Value Of An Estate?

24 July 2019

Before you can apply for probate, you need to value the estate (property, money and possessions) of the person who has passed away. This can take a long time and you might not know where to start. In this blog we go through the process step-by-step, looking at what you can expect along the way and how to work out the value of the estate without any hiccups.

How long does it take to value an estate?  

It can take up to nine months for an estate to be valued, and for more complex estates, the process can take even longer. There isn’t any rush to get this process complete, except if there is inheritance tax to pay, which is only the case if the estate is worth over £325,000.

Valuing the estate

To work out the value of the estate, you’ll need to consider:

  • Value of any assets
  • Value of gifts given
  • Outstanding debts

Valuing assets

A person’s assets are made up of any possessions they had at the time they passed away. This includes:

  • Property
  • Savings
  • Personal belongings
  • Shares
  • Private pensions

Properties should be valued by an estate agent, and this can usually be done for free using either a local estate agent or an online service such as Love Your Postcode. If the estate is likely to be worth more than £325,000, it’s recommended that you pay for a valuation from a Chartered Surveyor.

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With personal belongings, the best way to work out their value is to start with possessions that hold a high value, such as jewellery or vehicles. HMRC recommends that any possessions with an estimated value over £500 should be valued by a professional, whereas other items such as books or clothing can be valued based on estimates from the sale prices of similar second-hand items.

Any assets that are owned jointly should be valued by working out the actual value and then dividing by the number of people who own the asset, minus 10%. So for example, if a person owned a property with one other person, and it was valued at £100,000, the valuation would be:

£100,000 ÷ 2 = £50,000

90% of £50,000 = £45,000

This process works slightly differently in Scotland, with £4,000 taken off the initial calculation before dividing by the number of owners. So, for the same circumstance for a property in Scotland, the valuation would be:

£100,000 – £4,000 = £96,000

£96,000 ÷ 2 = £48,000

Despite automatically transferring to the other account holder, this valuation process is also used to determine finances held in a joint bank account.

Valuing gifts

Gifts given away by the deceased up to seven years before their death may be liable for inheritance tax. This law is in place as it prevents people from passing on significant assets to a family member or friend shortly before their death, in a bid to avoid inheritance tax.

An annual ‘gift allowance’ of £3,000 means that any gifts given up to this value won’t be subject to inheritance tax, but anything over this amount will be liable. In addition, certain gifts aren’t subject to inheritance tax, although they depend on a few conditions, and these include:

  • Gifts valued at less than £250
    • Except when given to someone already in receipt of a gift over £3,000
  • Wedding gifts
    • Must be made before the wedding
    • Must be less than £5,000 if given to a child
    • Must be less than £2,500 if given to a grandchild or great-grandchild
    • Must be less than £1,000 if given to another relative or friend

Outstanding debts

Debts aren’t subtracted from the value of an estate, but you’ll still need to tell HMRC about them when informing them of the estate’s value. Typically, there are two types of debt you’ll need to account for:

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  • Loans
  • Liabilities

Loans can include mortgages, credit card bills and overdrafts, while liabilities refer to money owed for services that have been delivered but not yet paid for (e.g. electricity bills).

In summary

Working out the value of an estate can be a lengthy process, but by following the proper advice and seeking advice where necessary, you can ensure that it’s a relatively painless one.

For more information on executing a Will, read our handy FAQ guide for executors.