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Read more articles in: Blog, Private Client, Rachel Blackburn

How to identify and value the assets of an estate and its Inheritance Tax implications

When a loved one passes away, dealing with administrative tasks can be a daunting prospect that is made harder considering the emotional situation that caused it.

One of the most important tasks is valuing the deceased’s estate, which is crucial for tax purposes, particularly Inheritance Tax (IHT).

Valuing assets must be done before applying for probate, so it is a crucial aspect of the process.

What is an estate?

An estate comprises all the assets a person owns at the time of their death. This includes property, money, investments, businesses, and personal belongings.

Debts, such as loans, mortgages, and bills, are also part of the estate and need to be settled from the estate’s assets.

Identify the assets

The first step in valuing an estate is to list all the assets and debts. Assets can include:

  • Property
  • Money
  • Investments such as stocks or shares and trust funds
  • Life insurance policies and pension benefits
  • Personal belongings
  • Business assets

For each asset, you need to find out its value at the date of death. This might involve getting professional valuations for property or valuable items.

For money in bank accounts or investments, you should contact the relevant institutions to get a valuation.

Debts should also be valued at the date of death. You should contact lenders or service providers to find out how much is owed.

Once you’ve valued all the assets and debts, you can calculate the net value of the estate by subtracting the total debts from the total assets.

Inheritance Tax (IHT) implications

IHT is a tax on the estate of an individual who has died. The standard IHT rate is 40 per cent on the part of the estate above the nil-rate band, which is currently £325,000.

However, there are several reliefs and exemptions that can reduce the IHT liability.

For example, if the deceased left everything above the £325,000 threshold to their spouse, civil partner, a charity, or a community amateur sports club, there’s usually no IHT to pay.

There is also a ‘residence nil-rate band’ which might apply if the deceased’s home is left to their direct descendants, such as children or grandchildren.

Dealing with the death of a loved one is never easy, but understanding the process can help make the administrative tasks a little less daunting.

If you would like further help or information about identifying and valuing the assets of an estate, we are here to help. Please contact us today.

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