When you value someone’s estate, you must include any cash or other assets they gave away:
- in the 7 years before they died
- at any time if they continued to benefit from it (for example they gave a house away but lived in it rent-free) - these are ‘gifts with reservation of benefit’ in Inheritance Tax forms
Don’t include gifts you don’t pay Inheritance Tax on.
Gifts put in a trust
Trusts are a way of looking after assets for someone else. If the person put gifts in a trust at any time, ask the ‘trustees’ (people looking after the trust) to help you work out:
- if they count as part of the estate for Inheritance Tax
- the value of anything that counts
Working out the value of gifts
Most of the time you use the ‘market value’ (realistic selling price) of the gift when it was made.
But if the gift was part of assets that were worth more combined than split, you use the value that the estate lost when it was given away.
A person had 2 paintings valued at £100,000 together, but only £30,000 each separately. They gave one away before they died.
Their estate lost £70,000 in value because of this gift - this is the value of the paintings together (£100,000) minus the value of the painting that the person kept (£30,000).
So the value of the gift is £70,000.
You can use estimates if either:
- the estate’s ‘gross’ value is less than £200,000 (the gross value is the value of assets plus gifts)
- all the estate passes to the dead person’s spouse or civil partner, a charity or organisations like museums or community amateur sports clubs
Otherwise you’ll need accurate valuations. Use a professional valuer for gifts over £500.