Mountain or molehill? – Probate valuations can be tricky and time-consuming. Let’s explore how to correctly value shares for inheritance tax
It’s not uncommon to uncover stacks of paperwork in the property of a deceased family member. When you are presented with boxes or bags of paper to sort through it can add hours of additional work to your processes; time that could be better spent dealing with the needs of your client. The elderly are particularly likely to keep large volumes of paperwork, which can include bank statements, bills, and share certificates.
How to value shares for inheritance tax
It is estimated that there is over £600 million in dormant shareholding accounts in the UK. In August alone, around 1 in 10 matters that went through our Financial Profile Premium service, produced a match for at least one shareholding. If there are no certificates found in the property, and we identify shares during the Asset Search, copies will need to be arranged with the relevant registrar(s) before they can be valued for IHT purposes.
Common challenges when dealing with shareholdings
When dealing with shares, accuracy is key. It’s vitally important to ensure that correct due diligence is carried out to understand the full extent of the deceased estate in order to reduce the risk of liability complications further down the line.
Things aren’t always as straightforward as they might first seem; companies merge, change names or become delisted over time which can lead to hours of research to track them down.
Clients regularly tell us that valuing shares is a difficult undertaking and whilst there are methods out there to help, they can’t always be relied upon when something goes wrong. Check the small print on some of the free online resources and they often state ‘not for commercial purposes’, meaning that if there are any errors or omissions you aren’t covered.
When it comes to the valuation itself, the ¼ up method, the HMRC process used to value shares for probate, can be tricky and shouldn’t be used in the case of Unit Trusts. The ¼ up method essentially takes the quoted Stock Exchange value of the shares on the day of death, adding one-quarter of the difference between the low and high prices to the low price to give you your closing value. This sounds complicated enough, but what happens if the individual dies on a weekend when the stock market is closed? And what if dividends are due? There are all considerations that you need to take into account. We worked on a case recently where the true value of the shares could have been one of three amounts depending on the way it was calculated so there is real risk involved.
How can Estatesearch help?
Our Share Services offer a fully managed end-to-end solution for dealing with Shareholdings, taking your mountain of paperwork off your hands and turning it into a more manageable molehill.
Our Securities Manager Sian Flanagan can expertly assist in verifying and confirming the validity of shareholdings, using our proprietary database to ensure that any shares in companies that have changed names or merged are correctly dealt with. Once those steps have been taken, for just £6+ VAT per holding, we can quickly and efficiently undertake the probate valuation, accurately valuing the shares and identifying any dividends.
Whenever I have an estate which requires a Probate valuation of the shareholdings, my go to is always Sian whom I have used for many years. She always responds to the requests promptly, and the valuation is always in a format which can easily be included in the Inheritance Tax accounts.
Karen Powell, Solicitor
After valuation, for an additional cost-effective fee, we can also register the Grant of Representation and arrange the sale or transfer.
To learn more about our Share Service, why not read our recent Q&A or register your interest in our upcoming knowledge session webinar on the 16th of November?
Originally published on Today’s Wills and Probate, 28th October 2022