How Do I Find Out The Value Of An Estate?
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 estateTo work out the value of the estate, you’ll need to consider:
- Value of any assets
- Value of gifts given
- Outstanding debts
Valuing assetsA person’s assets are made up of any possessions they had at the time they passed away. This includes:
- Personal belongings
- Private pensions
£100,000 ÷ 2 = £50,000
90% of £50,000 = £45,000This 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 = £48,000Despite automatically transferring to the other account holder, this valuation process is also used to determine finances held in a joint bank account.
Valuing giftsGifts 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 debtsDebts 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:
In summaryWorking 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.