Dealing with the aftermath of a loved one’s passing is emotionally challenging, and the administrative responsibilities can feel overwhelming.
Among these tasks, one of the most critical is valuing the deceased’s estate, a necessary step for determining any Inheritance Tax (IHT) obligations and applying for probate.
Understanding the estate
An estate includes everything a person owned at the time of their death. This encompasses property, money, investments, businesses, and personal belongings.
Additionally, any outstanding debts such as mortgages, loans, and bills must be settled from the estate’s assets.
Identifying and valuing assets
The first step in managing an estate is to compile a comprehensive list of all assets and liabilities. These assets might include:
- Property
- Cash and bank accounts
- Investments like stocks, shares, or trust funds
- Life insurance policies and pension benefits
- Personal belongings
- Business interests
Each asset needs to be accurately valued as of the date of death.
For property or high-value items, professional appraisals may be necessary. For financial assets, contacting banks or investment firms will provide the needed valuations.
Similarly, all debts must be valued at the date of death, so it is important to reach out to creditors to determine the outstanding amounts.
The net value of the estate is then calculated by subtracting the total debts from the total assets.
Inheritance Tax (IHT) considerations
Inheritance Tax is charged on the estate of the deceased, typically at a rate of 40 per cent on the portion exceeding the nil-rate band, which is currently set at £325,000.
However, several reliefs and exemptions can reduce the IHT liability.
For instance, if the estate is passed to a spouse, civil partner, charity, or community amateur sports club, it is often exempt from IHT.
Additionally, the ‘residence nil-rate band’ may apply if the family home is left to direct descendants, such as children or grandchildren.
While the loss of a loved one is always difficult, having a clear understanding of the steps involved in valuing an estate can help ease the burden of managing these essential tasks.
Our team can help you through this process and make things a little less of a struggle. Contact us today for more information.
