Worried about the loss on investments in an estate? Anyone dealing with an estate needs to read on…

4 minutes reading time

The stock market has taken a hit recently amid the COVID-19 uncertainty. Investors around the country are picking up the phone to their financial advisors to ascertain the damage. But what are the implications for an estate where an individual who held investments has died? There are things that the person dealing with the estate needs to know.

The tax relief

When someone dies any investments owned by them are valued at the date of death for inheritance tax purposes. If you then sell the shares at a loss it is possible to replace the higher probate values with the lower sale price and claim back the additional inheritance tax you paid on the higher value.

How to qualify

There are a number of conditions that must be met to allow you to do this:

  1. The sale must take place within 12months of death;
  2. To qualify, the shares must be listed or unit trusts. Unlisted shares and those on the Alternative Investment Market do not count;
  3. The shares must have been sold by the personal representatives (the Executor or Administrator with legal authority to deal with the estate or a Trustee);
  4. The relief if only available if the overall gross sale proceeds on all qualifying investments sold in the 12months is less than the probate value; i.e. you cannot just include the shares that have lost value, you have to look at all investments together;
  5. You must make the claim within 4years of the year of the sale;

What about a fall in property value?

It is also possible to claim back tax paid on the value of a property if it sells for a lower value within 4years of death. See our separate blog in relation to property values here.

Important to note

It is important that family members who are acting as Executor/Administrator get proper legal advice in respect of the above reliefs. If they fail to claim back tax in the relevant time periods, then they could be held personally liable by the beneficiaries.

The drop in the stock markets may offer some other opportunities for reviewing and planning. We are urging clients to speak with a financial advisor to see if now is a good time to bank capital losses and move investments around.

Further Information

Our Private Client team can provide guidance and advice to Executors/Administrators to ensure they are meeting their obligations.

Should you require any further information regarding how COVID-19 might impact the provisions in your lease you can contact a member of our dedicated real estate team on 0161 941 4000 or at lawyers@myerson.co.uk