Estate Valuation for Probate: What Date, What Assets Count

Before you can apply for probate or report the estate to HMRC, you need a complete and accurate valuation of everything the deceased owned and everything they owed. Getting this right matters: the valuation determines whether inheritance tax is due, the amount of tax payable, and forms the basis for the estate accounts you will prepare for beneficiaries. The starting point is always the same: value everything as at the date of death.

The valuation date is the date of death

Every asset in the estate must be valued as at the date of death. Not the date you receive the probate grant. Not the date you sell the asset. Not today's date. The date of death.

This rule applies even if assets increase or decrease in value after death during the administration period. If the deceased's investments fell sharply in value in the weeks after they died, you still use the date-of-death value for IHT purposes (though there are separate reliefs available in certain circumstances if assets are sold at a loss within specific timeframes).

Assets to include

The estate includes everything the deceased owned in their sole name at the date of death, plus their share of jointly held assets. The main categories are:

Assets to exclude

Some assets do not form part of the estate for probate or IHT purposes:

• Pensions: most defined contribution pensions and personal pensions are held in trust and pass outside the estate. The pension trustees decide who receives the death benefits. Always check the specific policy terms, as some older pension products may work differently.
• Jointly held assets passing by survivorship: assets held as joint tenants (not tenants in common) pass automatically to the surviving owner and do not form part of the estate. This includes most joint bank accounts and property held as joint tenants.
• Assets held in a trust during the deceased's lifetime: trust assets are generally outside the estate, though some trusts have IHT implications of their own.
• Life insurance written in trust: proceeds paid directly to trust beneficiaries bypass the estate entirely.

Valuing listed shares: the quarter-up rule

For IHT purposes, listed shares are valued using the "quarter-up" rule rather than simply taking the closing price. The quarter-up calculation works as follows:

1. Take the lower of the two prices quoted in the Stock Exchange Daily Official List (SEDOL) for the date of death
2. Take the higher of the two prices
3. Calculate one quarter of the difference between lower and higher
4. Add that quarter to the lower price

Example: if the shares are quoted at 200p and 208p, the difference is 8p, one quarter is 2p, and the IHT value is 202p per share. Investment platforms and stockbrokers can usually provide the necessary date-of-death prices on request. If the stock exchange was closed on the date of death, use the prices from the previous or following business day (whichever gives the lower value).

Property valuation in practice

HMRC expects residential property to be valued at "open market value": the price a willing buyer would pay a willing seller in an arm's length transaction at the date of death. You can use either a RICS-registered surveyor's formal valuation or written letters from at least two estate agents.

If HMRC considers the property undervalued, they may open an enquiry and seek a higher figure. Using a professional valuer reduces this risk and provides documented evidence of the figure used. For properties in active markets or with unusual features, a RICS valuation is the safer choice.

Deductible debts

The taxable estate is the gross estate minus deductible liabilities. Debts that can be deducted include:

• Outstanding mortgage balance at date of death
• Credit card balances
• Personal loans
• Utility bills outstanding and unpaid at date of death
• Income tax and other tax owed to HMRC at date of death
• Funeral expenses (reasonable costs: burial or cremation, death certificates, a modest wake)

Debts that cannot be deducted include statute-barred debts, liabilities incurred after the date of death, and debts secured on assets that are exempt from IHT.

What to do with the valuation

Once you have a complete picture of assets and liabilities, you use the figures in three places:

• To determine whether the estate is an excepted estate or whether the IHT400 must be submitted to HMRC
• As part of the probate application, where you declare the gross and net estate values
• In the estate accounts you prepare for beneficiaries at the end of the administration period

Keep a clear written record of how each asset was valued, including the source of the figure and the date it was obtained. This protects you if HMRC queries the return and helps beneficiaries understand the calculation.

Related guides

• How to apply for probate
• Probate costs
• IHT forms explained
• Executor duties explained