Valuing Shares for Probate.

John_Pierpoint

Continuing the saga of Mr Dog:
http://forums.moneysavingexpert.com/showthread.html?t=1164505

Mr Dog died at the weekend and he had three holdings of shares.

Am I right in in thinking that as his executor I can choose to value his share holdings for probate & InHeritance Tax (IHT) purposes using the Friday or the Monday prices?

Obviously the shares have fallen considerably since last autumn; am I right in thinking I can sell these shares as soon as I get probate and go back to the Capital Taxes office and substitute the present values for tax purposes.

Alternatively can I transfer the shares to a beneficiary at a date of death valuation and the beneficiary then has a buffer before a capital gain is made?
In other words if the shares of "Mega Bank" were worth 99 pence in the autumn but now are only worth 50 pence the beneficiary will not have any profit until the shares are back over 99p?

jimmo

I thought Mr Dog had died last September but now you say he died at the weekend.
As you then go on to refer to the value of the shares in the autumn and their value now I am afraid I am confused. Can you clarify that?

dzug1

Perhaps 'A' weekend is meant rather than last weekend.

Yes you can choose the Friday or the Monday - I suspect you have to choose the same for all the shares though.

Not sure about your other questions other than the recipient's base value for CGT is always the probate value - but if he receives them in lieu of a monetary bequest then for that purpose only (ie NOT CGT) they are valued on the date of transfer.

jimmo

dzug1 wrote: »

Perhaps 'A' weekend is meant rather than last weekend.

Yes you can choose the Friday or the Monday - I suspect you have to choose the same for all the shares though.

Ah! That makes sense, sorry.
Assuming dzug 1 is right then the Probate value will be the value at the date of death in the first instance. As I understand it there is the opportunity to revise the Probate value to the sale value if the shares are sold but it is an opportunity, not a requirement.
Fairly obviously there is no point in revising the Probate Value if no IHT is chargeable but, to my limited knowledge, there is every point if IHT is charged.
Now onto Capital Gains where I claim to know a lot more.
The (final) Probate Value will become the acquisition value of the shares for whoever acquires them at the date of death.
If you sell the shares as executor as soon as you get Probate you will have to consider whether you sell them in your own right as executor or you sell them as bare trustee of the beneficiaries.
If you sell as executor any Capital Gains loss will be yours as executor and may be of no use to anybody. If you sell as bare trustee the beneficiaries will be able to claim their respective shares of the loss to set against any other gains they have or to carry forward for use in the future.
If you pass the shares on to the beneficiaries then they will have acquired them at the date of death of Mr Dog at the Probate Value and they will have the buffer as you suggest..

John_Pierpoint

Just to clarify, Mr Dog died the same weekend as Lehman Bros.
[What is the latest news on Lehman Bros London cash balances?]

Thank you both for your advice.

localhero

John_Pierpoint wrote:

Obviously the shares have fallen considerably since last autumn; am I right in thinking I can sell these shares as soon as I get probate and go back to the Capital Taxes office and substitute the present values for tax purposes.

If shares are sold within 12 months of death, at a total value which is lower than that declared for probate, a claim can be made for a refund of IHT on form IHT 35.

However, this cannot be a selective claim; if a loss on the sale of one shareholding is offset by the gain on the sale of another, the two must be taken together.

Cook_County

Although rusty on this I was always taught to use the "quarter-up" price as a starting point for probate and this still seems to be what HMRC say:

http://www.hmrc.gov.uk/cto/customerguide/page8-1.htm

John_Pierpoint

In the good old days, ie about 5 years ago, the stock exchange daily list was available on paper in the County Library.
Now the figures are available on the web BUT one has to pay for the valuation. So there is not much point in getting a point something or other cheaper price if there is no IHT tax payable. The notes with form IHT 400 etc. says the Capital Taxes office will be happy with the Financial Times "mid" closing price.