If you are writing your will, you might also be considering valuing your estate. Probate can be a complicated and lengthy process but providing an estate valuation before you die can help relieve stress from your loved ones.
We cover the key things you need to know to value your estate for probate:
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Probate Meaning
To put it simply, the meaning of probate is the legal process of authenticating a will. To do so, you will need to appoint an executor to administer your estate to ensure that your debts are paid and that your assets are distributed according to the wishes stated in your will.
When a person dies, their estate must usually go through probate before it can be distributed to the beneficiaries. However, applying for probate can be a complex and overdrawn process if the estate isn’t valued first, so’s important to know how to value your estate for probate.
How Long Does Probate Take UK?
If you already made a will before you passed away, applying for probate can take less time, but this is not always the case. In England and Wales, it takes on average between 9 and 12 months to obtain the Grant of Probate and to complete the estate administration process – regardless of having a will or not.
The time that applying for probate takes can also be affected by potential delays that occur along the way. For instance, the probate process can be delayed if there are issues surrounding selling a property.
When is Probate Required?
Whether or not you need to value your estate for probate depends on the type of assets you have.
For example, if your property is owned as tenants in common in the UK, you will be required to go through probate if there is a will. Each tenant in common has their own share of the property, so the estate must be valued to be divided up accordingly.
But say you have joint bank accounts with someone else, then they will automatically transfer to the surviving owner without the need to value your estate for probate. The same applies to property that is jointly owned: probate might not be necessary as the joint owner would normally have the right to sell the property without needing to go through probate first.
Another situation in which probate might not be necessary is if your estate is small enough to not owe any inheritance tax. In this event, a solicitor or other professional can apply for a “small estate certificate” from the court, which will allow the estate to be sold or distributed without probate. For this reason, it is vital to value your estate to see whether probate is needed or not.
When to Value an Estate for Probate
Valuing your estate ought to be done before you die. A grant of probate cannot be obtained unless you completed the Inheritance Tax forms, as the value of your estate must be known to complete the forms. As a result, probate becomes very hard for your loved ones if you didn’t value your estate before you passed away.
It can take many months to value your estate, so it is a good idea to not put it off. In fact, sometimes you will be required to start paying tax before you’ve even finished valuing your estate for probate.
Reasons to Value an Estate for Probate
There are several reasons why your estate must be valued:
- To apply for probate, a value of your estate is necessary.
- The value of your estate will determine whether inheritance tax needs to be paid or not.
- Individual assets must be valued to calculate the Capital Gains Tax on any assets that have increased in value since your death.
- Valuing your estate ensures that debts are paid and that the estate is correctly distributed to your beneficiaries.
How to Value an Estate for Probate
To work out your net asset value (the value of all your assets, with any liabilities deducted), you will need to put into consideration outstanding debts and the value of any assets or gifts.
Valuing assets
Your assets are any of your possessions, including property, savings, personal belongings, shares, and private pensions. HMRC recommends that you should get a professional to value them if their estimated value is over £500.
Items below this figure should be valued based on the prices of similar second-hand items.
For the value of assets that are jointly owned, divide the value by the number of people who own the asset and deduct 10%.
Valuing gifts
Any gifts you have given away may be subject to inheritance tax if you die within 7 years of giving them. However, the annual ‘gift allowance’ means that any gifts valued £3,000 or less aren’t liable for inheritance tax.
Outstanding debts
Typically, there are two types of debt you will need to account for: loans (mortgages, credit card bills, and overdrafts), and liabilities (any money owed for services, such as water bills).
How Legacy Wills and Probate can Help
Here at Legacy Wills and Probate, we lead the way when it comes to our online will writing services and professional support. If you need advice on probate and wills, we are here to lend a hand.
For more information, don’t hesitate to get in touch today. Call our friendly team on 0333 344 4325, or email us directly at sales@legacywillsandprobate.com, and we’ll get back to you as soon as possible.
