Falling markets, IHT valuations and CGT

IHT is based on the value of property owned by the deceased immediately before his or her death. It is highly likely that to some extent, the personal representatives will need to realise some of the assets comprised in the estate in order to realise the cash needed to pay the tax. What happens if, by the time the personal representatives have extracted the grant of representation, the asset in question cannot be sold for as much as its probate value – perhaps for not even as much as the IHT to be paid? For many types of asset, such as land and chattels, valuations are a matter of estimation and negotiation. If something had actually been sold immediately before the death it would be the sale proceeds rather than the property itself, which would be valued in the estate. It is indeed often recognised that an actual sale in the open market soon after the valuation date may give a better idea of the value at the earlier date than the original estimate. The financial markets are, however, rather different. Prices are constantly listed and values at particular dates can therefore be ascertained without argument. As Northern Rock shareholders, and others, have discovered, prices and values can change dramatically over a short period of time.