Administration of the Estate – Part 2

Having written to all the organisations that the deceased had financial dealings with, the answers should start coming back as to the value at the date of death.

There may be 2 dates that are relevant, the first is the date of death and the second is the date that the asset is dealt with or otherwise disposed of. For some things the value will be the same, but not always. For things like jewellery, the value is not likely to change during the months of the administration of the estate. But money in a bank account can accrue extra interest, so the value may change during the period of the administration of the estate.

The first thing to resolve though is the value at the date of death. What was the value of the asset/s at that date? It is this information that is needed to obtain the Grant of Probate.

The Executors will need a file to keep their correspondence in and will need an overall spreadsheet of the information they find out. The spreadsheet can be in whatever format is easiest for them to work with; it may be a computerised spreadsheet or old fashioned bit of paper.

The two most obvious ways to organise the paperwork is in relation to the beneficiaries of the estate or in relation to the Inheritance Tax Return or some kind of combination of the two.

Every asset needs to be valued and therefore needs to be known to the Executors in order that they can value them or arrange their valuation.

I’m going to bring in the dreaded T word here – Tax! There are generally three kinds of tax that affect estates, Inheritance Tax (IHT), Income Tax (IT) and Capital Gains Tax (CGT). If the estate is sufficient small that IHT is not an issue (the net estate is less than £325,000) then CGT should be the next consideration. Some assets have a range of values, such as property, whilst other’s have very clear values, such as money in the bank. Where the value of an asset is unclear and IHT is not the issue, as the person receiving the asset will have to consider their own CGT liability, then the asset should ideally be valued at the high end of the spectrum of values rather than the low end, which will mitigate the beneficiary’s potential future CGT liability.

Where there is regular money in or out, the value of at the date of death will need to be ascertained and it will either be an asset or a debt. I’ve had plenty of conversations with people when making their Will who have assured me that they have no debts and in their day to day life they may well be right. But at death they may owe one of their utility companies some money and this in estate terms is known as a debt, so they may end up having debts in death, which they never really had during lifetime.

It is a balance sheet exercise though, when the Inheritance Tax Return is completed the debts go in one place and the assets go in another. Whatever they are, they all need to be found out and it is the job of the Executors to find all of the assets and debts and their value.

Some estates can have unclear assets and therefore enquiries need to be made as to what the assets are. If the deceased leant some money, it is an asset of the estate, it needs to be known.

Whatever they are and wherever they are, the assets and debts and the value of the estate must be identified.