Calculating Share Values for Probate

Understanding how to work out share values for probate is therefore crucial to ensuring the process runs as smoothly as possible, while reducing the risk of unwanted hassle during what will already be an incredibly stressful time.

Identify the Deceased’s Holdings

The first step in calculating share values for probate is to determine exactly what assets and investments the deceased held at the time of their death. This is done by collecting their share certificates, which can either be stored with solicitors, accountants, banks, or investment management companies. They could even be kept somewhere in their home.

Once a comprehensive list has been made, the various shares should be categorised by type. The main categories are:

• Listed Shares
• Unlisted Shares (such as those in private companies)
• ISAs
• NSI & Premium Bonds
• Government and Municipal Securities

Not only will you need to locate and identify all the different types of shares, but you’ll also have to work out how many shares in a particular entity the deceased held. This is because it’s common for individuals to own multiple (sometimes hundreds and even thousands) of shares in a particular company — all of which will need to be accounted for. 

How to Value Shares in a Private Company 

Understanding how to value shares in a private company is a multi-step process, including elements such as reviewing annual reports and financial statements, deciding on a suitable valuation method, and ensuring detailed records are kept. It’s a good idea to seek specialist guidance throughout, so you can be confident that everything is as accurate as possible.

Once relevant information about the shares has been gathered (name of the company, types and number of shares owned, etc.), it’s important to ascertain how the business is performing and how healthy it is financially. This can be done by consulting annual reports, accounting statements, and other publicly listed information. Market trends and economic conditions should also be taken into account, as these could impact the overall valuation. 

There are several methods to work out share values for probate when it comes to private companies. Examples of these include the market approach, income approach, and asset approach. Deciding which of them to choose depends on the type of shares and circumstances of the business. The valuation itself can be carried out by a professional such as a forensic accountant to ensure accuracy. 

Throughout the process it’s important to keep detailed records of the valuation method used and the reasons for choosing said method, the information considered (annual reports, accounts, market conditions, etc.), and any supporting documents you may have. This is not only useful for probate itself, but also in case the tax authorities have any questions. 

Valuing Listed Shares for Probate

Listed shares are defined as being “shares in a company that can be bought and sold on a particular stock market” — such as the London Stock Exchange (LSE), and the New York Stock Exchange (NYSE). Determining share values for probate depends on the closing price of each share on the date the deceased passed away.

The price of a share will appear as a range (for example between 1500p and 1700p). Determining its actual value involves working out what’s known as the “quarter-up price”, the official valuation method used by HMRC. 

To calculate the “quarter-up price”, you need to do the following:

• Work out the difference between the lowest and highest range (200p as per the example above)
• Calculate a quarter of this figure (50p)

Once the “quarter up price” has been determined, the final step is to add this amount to the lowest of the two ranges (1500p + 50p = 1550p) to calculate the value of each share. 

If a dividend was due at the time of the shareholder’s death, these will also need to be valued. This is done by multiplying the amount of the dividend with the number of shares owned by the deceased.  

ISAs and Premium Bonds

When it comes to valuing Individual Savings Accounts (ISAs) for probate, this can be achieved by either requesting a valuation from the institution that holds the ISA, or from an investment management company. The value will be determined by the closing price of the accounts on the day of death. This is the same process for Personal Equity Plans (PEPs) and Tax Exempt Special Savings Accounts (TESSAs).

National Savings & Investments (NS&Is) or premium bonds, meanwhile, are valued by the bank itself. Having information such as certificates, passbooks, or other records to hand can help locate the deceased’s accounts — although NS&I does have its own tracing service where necessary.  

Government & Municipal Securities

Any government and municipal securities owned by the deceased should also be taken into account. The valuation is determined by the closing price of the asset on the date of death. Examples of these securities include:

• Savings Bonds
• War Loans
• Victory Bonds
• Treasury & Exchequer Funding Stocks
• Stocks in counties, cities, or towns

What Happens if Markets are Closed?

If the relevant stock exchanges were closed when the shareholder passed away, either on a weekend or for a public holiday, you will have a choice of two days you can use as a reference. These are either the last day the exchange was open before the individual died, or the first day of reopening afterwards.

As you’ve likely noticed, calculating share values for probate can be quite tricky. Because of this, it’s important to obtain specialist advice and support to ensure the process runs as smoothly as possible, while avoiding potentially-costly mistakes. 

Thursfields’ private client team has a great deal of experience with managing complex and high-value estates, while ensuring that your interests are protected at all times. Because we’re a law firm that’s built around you, we take into account your unique circumstances and goals to deliver a truly bespoke service. 

Our private client department can assist with all areas of personal finance planning, such as the creation of wills, trusts, and wealth protection strategies. We can even help business owners to secure their financial legacy by devising a comprehensive succession plan. 

For more information about how we can help, contact our team today.