Assets and Liabilities

Taking stock of the assets and liabilities of the deceased

The first step for the executors/administrators is to list as many assets they know about. Whether that be from knowledge of the deceased or findings. Writing out to all the institutions that hold assets for the deceased is important. These letters should notify them of the death. Letters to the bank/building society should tell them to stop unpaid cheques and standing orders. The main goal then is to obtain in writing the value of all the deceased’s assets from each institution.

​This information must then be put on the probate forms. If the asset has been left as a legacy it must still be listed but on the requisite inheritance tax form. You must also acquire the value of any of the deceased’s jointly shared assets (Just the deceased’s share) this including assets that get passed over as survivor-ship.

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Valuing liabilities

Knowing the assets

Listed below are the main types of liabilities the deceased will have. You can delay payment on these debts until the grant has been received and funds from the estate are available.

  • Utilities (Water, Gas and Electric bills)
  • TV and Phone Bills
  • Loans, Credit Cards and Overdrafts
  • Catalogue payments
  • Rent
  • Debts owed to other individuals
  • Council Tax, Income tax and capital gains Tax

Funeral costs, within reason, are also classed as a liability against the estate also. If the funeral arranger is on benefits he can apply to the social fund to cover funeral expenses. This is a loan scheme ran by the benefits agency. The money will be re-paid by the state however if money becomes available.

Asset checklist

Listed below are the main types of assets commonly found in estates. They are as follows:

House and/or flat

Only the deceased’s share of the house is classed as part of the estate. If the property is equally shared by two people either one can leave their share to whomever they wish in their will. If however the property is jointly owned and the people are classed as Joint-Tenants then the deceased’s share will pass automatically to the Survivor.

When calculating the value of the property for IHT reasons it makes sense to make sure an estate agent does a formal valuation of the house (fees may chargeable for this).The next thing to do would be to notify the mortgage lender of the death (Where applicable). This can be done by contacting them and giving them all the deceased’s details and death certificate. Ascertain the remaining value of the mortgage and if they had any Life or mortgage protection. If so ask if it will cover the value and if there will be any remaining funds after the mortgage has been covered.

Bank Accounts

The administrator/executor should write out to the banks or building societies of the deceased. This is to ensure that all unpaid cheques, direct debits and standing orders are stopped. At this point you should also ask the bank for all deeds, share certificates and account balances. This includes joint accounts. You should get the values from the date of death. As well as that you will need to obtain a figure of the interest that has been earned on that money to date but has not been paid into the account. All of this information is needed for the IHT 400.

Once all of this has been done, opening an account in the administrator/executor’s name is the next step. You will need this account for all of the money from the assets to be collectively stored. It will also make distributing all of the assets a lot easier in the future as well. Once the account is set up and the grant has been acquired then the bank will transfer the deceased’s value into the administrator/executor’s account.

Stocks and shares

First of all it will be useful to find out if the deceased has any Stocks and shares. If they do the certificates could be stored at their home, bank, solicitor or the deceased’s stock broker. If the shares are in the name of the stockbroker of the deceased he must be notified of the death and sent a copy of the death certificate.

If no certificates can be found with regards to the shares then a statutory declaration and indemnity may need to be signed before these assets are distributed. The registrar will charge a fee for this. Some shares are not certified and do not come with certificates.

When a complete list of all these has been generated the administrator/executive can ask the stockbroker for a probate value. The stockbroker at this point will typically charge you a fee for each holding. The administrator/executive can make their own valuation on the shareholdings with help from the Stock Exchange Daily Official List on the day that the deceased died.

When working out the value of a stock it will be the lower of the two values given and then you plus a quarter of the difference onto the lower value. So for example:

The stock is listed as 80p-82p for that day

The lower value is 80p and the difference is 2p

Quarter of the difference is 0.5p

So the stock value on the day of the deceased is 80.5p

If the client has any unit trusts the values of such can be obtained from the fund manager/company. All of these shares/stocks should be listed on the schedules IHT411 and IHT412.

Businesses

If deceased holds any interest in a business then a value should be supplied by the business backed up with the last 3 years of accounts. They should also include a copy of any partnership agreement if one was in place.

Cars

Cars can be valued by a professional or they can be sold immediately and use that as the value on the date of death.

Jewellery

Jewellery can be collectively valued; however, if a certain piece is over £500 it should be valuated separately from the collective. Jewellers would be the best people to see about this but fees can be charged. You must also make them aware that it is being valued for probate.

Work of Art

You should see an Art Dealer if you think any particular piece stands out and make sure you get the value for auction on the date of death not for insurance purposes.

Personal Possessions

There is no need to craft a detailed list of all items that the deceased owned. The administrator/executive can make a fair assessment on all items and produce a value from that. However if there are certain pieces worth over £500 these should be valued separately. The assessment must be made as if they were being sold second hand or on auction on the date of death. If some possessions are jointly owned then the deceased’s share needs to be listed.

National Savings

For national savings accounts a NSA 904 form should be completed and sent to the address presented on the form. The executor will then need to write to national savings asking for values of the certificates held by the deceased at the date of death. The probate registry will also want to see this letter.

Premium Bonds

You must contact the Premium bonds office and notify them of the death, you can reach them on 0500 007 007.

With bonds you have the option of cashing them in straight away or leaving them in the prize draw for 12 months from the date of death. The prizes can be claimed, if won, in the normal way. The cash won will be included in the deceased’s estate. If the value of these bonds is less than £15,000, typically there is no need for a grant. All values of bonds should be put on to the NSA 904.

Outstanding salary or pension payments

If the deceased was employed, the employer will need to be notified of the death. At this time you should ask the employer if there are any outstanding salary payments or any other payments. They can request to see the gran of representation before paying out any such payments. The same applies as to if the deceased was a part of a pension scheme or union.

All of the above should be clearly stated on the IHT400 if any payments are made. Some payments from employers, pension schemes and unions may be discretionary which means they do not form part of the deceased’s estate. This means they will not be distributed under the Will or intestacy rules. Therefore there is no IHT to pay. HMRC will still need to be notified of any such payments and you can do this by filling in schedule IHT409.

Life insurance and pension policies

With regards to both of these products a death certificate and letter notifying them of the death should be sent to the insurance company. The letter should state the deceased’s policy number.

Make sure to ask the following questions:

1. What sum is payable

2. Was it placed in a trust for anyone

If it was in trust then the amount may be made payable straight to the named individual. If it wasn’t placed in trust the value (including any bonuses) will be put in to the deceased’s estate and should be stated in schedule IHT410. If the policy is linked to a mortgage for example the money should be paid directly to the creditors and any excess should be paid back in to the estate.

Taxes and Bills

The tax inspector of the deceased should be notified of the death and he/she will send the administrator/executor a tax return form to fill in. Once this has been done he will assess if there are any tax refunds or any further taxes to pay.

Social Security payments

The administrator/executor will need to assess if the deceased was receiving payments from the state. For example State pension or any other state benefits. You will then need to enquire if there are any outstanding payments with respects to either of them and make sure they are received if there are any. You must inform them to stop payments where relevant also.

Property outside the UK

The value in Great British Pounds of any property or debts payable to the deceased outside of the UK should be declared to the probate registry and/or the HMRC. You can do this in schedule IHT417 in the IHT400. IHT may be payable if the deceased is living in the UK at the time of death on these assets.