Before beneficiaries are able to inherit a deceased estate, an executor or administrator of the estate will need to take stock of everything that stands to be inherited (the good and the bad). The entire estate will need to be assessed so the total value of the assets within the estate can be determined, and any associated tax liabilities can be made known.
Have no clue what we’re talking about? Let’s dive deep into the world of assets and debts, and how to value them.
Assets and Debts for Consideration
As a starting point, an executor might consider creating a balance sheet of any assets owned by the deceased. This might include assets that are located further afield, such as:
- Real estate, property or rural assets such as crops and livestock
- Cars, boats or other vehicles and vessels
- Life insurance (separate to superannuation)
- Shares and investments
- Employment entitlements such as long service leave or unpaid wages
- Loans or reimbursements still owed by other people
- Personal possessions and belongings, such as furniture
- Antiques, paintings, rare collectibles or other valuables
- An entitlement to receive money or inheritance from another deceased estate
- A pre-payment on a credit card (if the account is in credit not debit)
- Interest in a business, partnership or joint venture
Debts are way less fun to think about, but are an equally important part of the process when it comes to finalising an estate. This is because you need to ensure that any creditors – people who are still owed money – are paid (unless there have already been provisions made for this in the Will). Some debts to take into account might include:
- Unpaid bills (like home utilities bills)
- Council and land rates
- Debts to the ATO or other government organisations
- Unpaid fines
- Credit cards
- Personal loans (e.g. car loan) or personal debts (to friends and family)
- Medical bills
- Funeral bills
Valuing Assets and Debts
The lists above can give you an idea of the types of assets and debts you could be faced with as part of the valuation process. There may be a different approach required in the way each is valued, but as a general rule, the value should be calculated based on the ‘date of death’ (as opposed to today’s date).
Cash and Non-Cash Assets
Cash-like assets, including bank accounts, shares and superannuation, will simply require you to check any statements (e.g. super or bank statement) or the share price to determine their value. For other non-cash assets, like cars, boats, furniture or antiques, it’s best to assign a second-hand resale value in line with comparable items on the market (like we really needed another excuse to trawl Facebook Marketplace).
Income and Debts
If the estate receives income after death, such as refunds, cheques or rent, these will need to be recorded separately if not included anywhere else as part of the value balance. Debts will also need to be tracked, as the estate has a general obligation to settle these before any remaining assets can be divided among beneficiaries.
Real estate’s a big ticket item, and you can estimate the value of it by comparing similar properties or using a reputable online valuation website. It’s also advisable to get an independent valuation of any property so that the fair market value can be accurately established, and minimise any potential disputes between beneficiaries.
Getting a Probate Valuation
A valuation for Probate purposes helps determine the market value of a deceased estate, and provides evidence of the estate’s total value. It can be taken in conjunction with the above preliminary investigations and estimations by the executor. The probate valuation is done on behalf of the beneficiaries and commonly used to identify fair market value of a deceased estate, so it’s wise to engage an independent valuer before selling or transferring ownership of the family home or any property assets.
A Probate Valuation Report is usually required by the Probate office in your state or territory, which the executor (or administrator) of the Will is responsible for providing, as well as the estimate of the total value of all the assets that make up the estate.