If you have been appointed as the executor of an estate or you are considering who you should appoint, then you should be aware of how an executor is responsible for valuing the estate of the deceased. If you are trying to think who would be the best choice as an executor, or are looking for advice on how to discharge your executor duties, read on to understand the executor’s role in valuing an estate.
Why do I need to value an Estate as an Executor?
Valuing the estate of the deceased, and valuing it accurately is one of the most important duties that an executor has. The reason for this is that the value of an estate is what is used to work out how much inheritance tax is due on the estate. If an estate is incorrectly valued, then it could mean that you end up paying inheritance tax on the estate when you didn’t need to – something the beneficiaries of the Will may not be too happy about.
You could also end up undervaluing the estate, which in turn means that you end up paying too little inheritance tax, and can be held financially responsible for the shortfall if it later comes to light.
What needs to be included when valuing the estate?
Valuing an estate means taking a comprehensive look at everything the deceased owned. This includes money, property, possessions, investments, bonds, pretty much everything that is owned by the deceased. This can include things such as cars and even racehorses. Racehorses can be extremely difficult to deal with when valuing an estate as their value can fluctuate. Imagine, for example, that the owner of a racehorse dies three days before the Grand National. The horse is an outsider at 100/1 odds but goes on to win the race. The value of the horse skyrockets as a result, however, the value at the time of the deceased’s death will be a fraction of the current value and can be very difficult to work out, and an executor will often need expert assistance in accurately determining the value of the horse.
Expert assistance is not only necessary when it comes to accurately determining the value of racehorses. HMRC recommend that any asset worth more then £500 is professionally valued to ensure that no mistakes are made, and an accurate estate value can be established.
The valuation of assets is also at the time of the deceased’s death, and any increase in the value of the estate since the deceased passed on is not counted in the valuation.
Are joint assets included in the valuation?
Yes, joint assets are included in the estate. However, the portion of the asset value that is included in the estate will differ depending on how much of the asset was owned by the deceased.
Removing Debts from the estate value
Once you have valued all of the assets of the estate, you must then subtract the value of any loans, debts, mortgages or outstanding bills from the total in order to arrive at the final, accurate, value of the estate.
Does this need to be done immediately?
The sooner that an estate is valued, the better. However, you do have until the end of the sixth month after the date of the deceased’s death to pay inheritance tax. So as long as you give yourself plenty of time to accurately value the estate and pay inheritance tax on time, then you can do the valuation whenever.
Need help with valuing an estate or paying inheritance tax? Contact our experts today to see how we can help you with the organisation of your estate and sorting out your obligations to HMRC.
