When you are the administrator or executor of an estate, the process is rarely straight forward or easy, and one of the things that tends to complicate matters is when the asset values, such as stocks and shares, drop in value once inheritance tax has already been paid on it.
When this happens, it is possible to get a refund on the paid inheritance tax as long as certain conditions are met.
Investments
Administrators and executors can apply for inheritance tax loss relief if the investments qualify and they were sold at an overall loss within 12 months of the date of death. The claim for relief has to be submitted within five years of the date of death (phrased as within four years from the end of the 12 month period the death occurred in).
Investments that qualify for inheritance tax relief include:
- stocks, shares and securities that are listed on one of the recognised stock exchanges worldwide on the date of death.
- UK Government Stock.
- Unit trust holdings
- Open-ended investment company holdings
Unlisted shares or shares that are held in companies listed on the AIM (Alternative Investment Market) are not classified as qualifying investments for inheritance tax loss relief claims.
Capital Gains Tax
All assets that are owned by the deceased are revalued at the date of death. This means that whatever the market value of the assets is on the date of death is what the assets are worth for the valuation of inheritance tax. The value at this time becomes the new base value for those assets. Any gains that have been made since the assets were purchased are cleared with no capital gains tax.
Every estate has a Capital Gains Tax allowance per year (£12,300 for 2020/21) which is the same as an individual’s Capital Gains Tax exemption allowance. This applies to the financial year the death occurred in and the two financial years that follow it.
Capital Gains Tax is charged on assets (except for property) at a rate of 20%. In some cases where the values of assets have fallen after death, the losses may be able to be used to offset some of the other gains of the estate and help avoid Capital Gains Tax on any gains made.
Losses of the deceased in the tax year of their death
This is something that executors and administrators can use to help the estate, especially in times like these when values of assets are falling. The losses that the deceased incurred during the year of their death can be used to offset any gains that are made by the estate in the following year. In fact, if the balance remains available, it can be used to offset any gains that were made in the three years before the death of the deceased.
We understand that losing a loved one is a difficult thing, and acting as an executor can be not only complicated but stressful. However, our friendly and professional probate experts are here to help. Contact us today to find out how we can help.
If you want to know more about asset values then contact us today.