Changes in estate value after probate

wizzywilc

I am at the final stages of administering an estate. The IHT due was paid in full before probate was granted in late 2018.
In realising the assets since probate there have been some changes. Shares, and stocks and shares ISAs realised less that their values at date of death. A classic car was sold for a few K more than the valuation we gave in IHT 400. This is probably because executors did more work on provenance after probate.
Do I need to do anything about this? I've struggled to find anything online.

Keep_pedalling

It is the the value of the assets at death that is important so the shift in value of the shares is just bad luck. Things like cares and houses are not so easy to nail an exact slur with snd the true value can only be realised at the point of sale.

If the car has only made a small change in the value of the estate as a whole I would not worry about it. Luckily capital gains tax does not apply to cars, so you don’t have to worry about that either.

xylophone

It is the the value of the assets at death that is important so the shift in value of the shares is just bad luck.

See

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm34010

What the relief does

When someone dies any stocks and shares in the estate are valued for Inheritance Tax (IHT) purposes at their date of death value (IHTM09703). But the price of shares can vary dramatically and, if shares are sold in the year following the death at an overall loss, relief may be available. In simple terms, the relief allows for the sale price of the sold shares to be substituted for their date of death values.

The basic conditions (IHTM34011) for claiming the relief are set out on the next page.



https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/373491/IHT35.pdf

MumOf2

Xylophone is correct. If the realisation value of shares goes down within a year, the resultant overpayment of IHT can be claimed back from HMRC (plus 0.5% interest). The sale of shares has to be taken as a whole, it can't be a loss on just some of them! The form to use is IHT35 - claim for relief, loss on sale of shares.

Likewise, loss on the sale of a house of more than 1% within four years of death means that you can claim back overpaid IHT on the probate value of the property.

Hope this helps.

MumOf2
x

xylophone

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm34172

Calculating the loss: how is the loss calculated?
To calculate the overall loss on sale you compare

the total value on death (IHTM34173) on the normal open market basis of


the qualifying investments (IHTM34131) in the death estate
that are sold (IHTM34151) by the appropriate person (IHTM34161)
within 12 months after the death
with

the aggregate value of those investments at the time they were sold. The sale value (IHTM34176) is


the price for which they were sold, or if greater
the best consideration which could reasonably have been obtained for them at the time of the sale.
If the value on death is more than the sale value, the difference is the loss on sale, IHTA84/S178 (1).

If the relief is due then the date of death value of the sold investments is reduced by the amount of the loss on sale, IHTA84/S179 (2). It is not normally necessary to determine the revised value for each individual investment, although this might be needed for CGT purposes or where a claim for Double Taxation relief is involved.

wizzywilc

Many thanks for your helpful responses. I am out of time on a small part of the loss as it took me a long time to get round to selling two small parcels of shares, but will claim on the rest.

Longsc

I am Executor of an Estate for which the deceassed died in early February 2020 but due to the Pandemic and other delays Probate was not granted until late February 2021. IHT was paid in August 2020. 

In line with the will, the deceased's share holding of Lloyd's shares was sold to fund charitable bequests but the sale of these shares  could not take place until Probate was granted. We now find ourselves in the position where IHT paid on the share price calculated at date of death was consierably in excess of what it would have been based on the price when the shares were  sold  just over a year later.

In normal circumstances as outlined earlier in this thread the Estate would be entitled to claim for over payment of IHT on the shares but where do we stand given that the time period involved in this case is more than the 12 months stipulated.

Do the HMRC regulations allow for special cases on appeal, since in this instance we have fully complied by paying IHT, carrying out the deceased's wishes to sell the shares as soon as Probate was granted. It is not the fault of the Estate that it took so long for Probate to be granted before the shares were sold and the resultant overpayment of IHT on the shares surely ought to be eligible for a refund irrespective of  exceeding the 12 month period between date of death and the date when the shares were sold. 

Any advice on this aspect would be greatly appreciated. 

Keep_pedalling

The bequest on these shares should have been exempt as the beneficiary was a charity, so the change in value should make no difference to the overall IHT bill.

Longsc

KP - Thanks for commenting. Unfortunately the will wasn't this specific, ie to make the share sale proceeds a charitable bequest in its own right. There were a number of assets including the shares for which the instruction was to sell and add the proceeds into the Estate from which the Charitable bequests were then to be paid. As a consequence IHT was payable on the saleable assets including the shares. The Charitable bequests were themselves IHT free but the share sale proceeds were not.