Shares, investment funds and share-dealing accounts are common estate assets, and they come with their own paperwork separate from bank accounts or property. An executor’s job is to identify what is held, value it correctly for probate and tax purposes, and then either sell the holding or transfer it to a beneficiary. Here is how the process generally works.
Plain-English guide written by Simon Jenkins — covering every stage of the probate process.
Finding out what is held
Share certificates, dividend statements, or correspondence from a registrar such as Computershare or Equiniti are the usual starting points for identifying listed shareholdings. Investment platforms and fund managers should be notified of the death directly, and most will ask for a copy of the death certificate in the first instance, followed by the grant of probate once it is available. It is worth checking for old paper share certificates specifically, as these are easy to overlook if the deceased held investments long before everything moved online.
Valuing shares for probate
Listed shares are valued for probate and inheritance tax purposes at their market value on the date of death, using a specific method that takes the lower of the two quoted prices for that day and adds a quarter of the difference between the two prices. This quarter up value, rather than the closing price, is the figure that should go into the inheritance tax return and the probate application. Unlisted or privately held shares are more complex and usually need a specialist valuation.
What an executor can do once the grant is issued
With the grant of probate or letters of administration in hand, an executor can instruct the registrar or platform either to sell the holding and pay the proceeds into the estate account, or to transfer the shares directly to a beneficiary by way of an assent. Which option makes sense depends on whether the beneficiaries want to keep the investment or would rather receive cash, and on any capital gains tax implications of selling at estate level versus after transfer.
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Capital gains tax during the administration period
If shares are sold by the estate for more than their probate value, capital gains tax may be due on the increase. Personal representatives currently have an annual exempt amount of £3,000 for gains made during the administration period, the same allowance available to individuals, with gains above that taxed at 24% for personal representatives. If shares are instead transferred to a beneficiary and sold later, any gain is measured from the probate value, so there is no capital gains tax simply because of the transfer itself, only on later growth in value.
Dividends and other income during administration
Shares held by the estate can continue to generate dividends while the administration is ongoing, and any such income remains taxable and needs to be accounted for separately from the capital value of the shares when preparing the estate accounts. Keeping a clear record of income received during this period, alongside the capital position, makes the final accounts to beneficiaries far easier to prepare. Our guide to selling an inherited property covers the equivalent considerations that arise for the largest asset in many estates.
How Curtis Legal can help
Valuing and dealing with shareholdings correctly protects both the executor and the beneficiaries, particularly where capital gains tax is in play. Read more on our main probate pages about estate administration, or get in touch for help with a specific portfolio.
Frequently Asked Questions
How are shares valued for probate?
Listed shares are valued using the lower of the two quoted prices on the date of death plus a quarter of the difference between them, known as the quarter up rule, rather than the closing price.
Can an executor transfer shares directly to a beneficiary?
Yes. Once the grant of probate or letters of administration is issued, shares can be transferred directly to a beneficiary by way of an assent, or sold with the proceeds paid into the estate.
Do executors pay capital gains tax when they sell shares?
Personal representatives have an annual exempt amount of £3,000 for gains made during the administration period, with gains above that taxed at 24%, the same flat rate that applies to personal representatives generally.
Is there capital gains tax just for transferring shares to a beneficiary?
No. Transferring shares to a beneficiary is not itself a disposal for capital gains tax. Any gain is measured from the probate value when the beneficiary later sells.
What happens to dividends paid during estate administration?
Dividends received while the estate is being administered remain taxable and should be recorded separately from the capital value of the shares when preparing the estate accounts.
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If you need help valuing or dealing with shares and investments in an estate, call us on 0800 214 216 for a same-day callback.
Written by Simon Jenkins, solicitor and director of Curtis Legal Limited (Simon Jenkins SRA 167489; Curtis Legal Limited SRA 450129).
