IHT and variation in value of estate between time of death and realisation of assets?

itm2

I am an executor of my late mother's estate. She had total savings of a little more than £600k, and a house which is worth somewhere around £400k (it has not yet been formally valued). She also gave gifts of around £95k in the last couple of years before her passing. So the estate will be subject to IHT. The two main beneficiaries of all assets are myself and my sister.
Based on the experience of handling my father's estate when he died a few years ago, it is likely that the value of my mother's assets used for HMRC asset declaration/probate purposes (i.e. from statements provided by the relevant financial institutions) will not be the same as the actual value realised when the assets are crystallised - e.g. due to fluctuation of stock prices, adjustments related to the way interest is accrued and paid, etc). This is almost certain to be true of the house valuation, as we will have no idea what the actual sale price will be.

My main question is: how should the difference between declared and actual asset value be handled for tax purposes? Should I wait for all assets to be sold (i.e. shares/unit trusts/house) and then submit a form to HMRC to declare the variation, and hence pay/reclaim any over/under paid IHT?

Also - in general, is it a good idea to make conservative (i.e. slightly higher) valuations during the HMRC/Probate stage?

Keep_pedalling

The shares should be valued at the closing price on the day of death. If they subsequently increase in value then that increase would be subject to capital gains tax. If they significantly decrease it is possible to claim back some IHT.

The house should be valued by a RICS surveyor, free estate agent valuations are not good enough for an estate of this size. 

Secret2ndAccount

You will need to pay the IHT, or at least the first instalment, within 6 mths, so you will have to estimate the value of the house. I used a RICS surveyor, and it cost a few hundred pounds. However, on the IHT forms there are boxes you can tick to say you intend to sell within 12mths and would like to use the sale value as the IHT number. If you do this, I don't think it's so important that the estimate is spot on.
If you opt to get a valuation at date-of-death, and the house subsequently sells for more, then a Captial Gains Tax liability could arise. The first 12,300 (of gain) is free, then the tax (for houses) is 28% of the rest of the gain.
If you opt to use the selling price, and this is higher than at DoD, then you will increase your IHT, paying 40% on the increase.
So in most cases it makes sense to risk the CGT rather than pay the IHT. However, if it turns out you are below the IHT threshold then you risk paying CGT instead of nothing.