What valuation to use when dividing up assets for the beneficiaries of the will?

[dominoman]

I am an executor for my father's estate, which consists of a house and a substantial amount of shares, mostly in unlisted companies.

For probate we are valuing everything (with expert help when needed).  However the time it has taken meant that some of these shares are now worth less, and some a lot less than on the date of death.  

I'm not concerned about revaluing for IHT purposes because they are mainly exempt (EIS shares held for 2+ years).  But when distributing the assets to beneficiaires should we revalue?  

Also, one of the beneficiaires gets the house.  Others get unlisted shares to an equal value to the house.  I feel in distributing we should consider the shares at a lower value than we put on the probate form to take account of the risk they carry and the inability to sell them.  Is that standard practice?

[AGoodman]

Yes, you should appropriate (distribute) the assets at the value on the date of distribution (rather than probate).

Yes, market value should always take into account illiquidity (i.e. difficulty in selling) - a minority holding in a private trading company might be discounted by up to 90% vs a proportion of the whole company (i.e. a 10% holding might have a value equivalent to 1%-4% of the value of a 100% holding). This includes when valuing for probate.

[dominoman]

Many thanks. That's good to know. So we will need to reassess the value just before assets are distributed.

I've been looking at the minority holding discount. My late father's shares were mostly in small private companies invested in the last 2 or 3 years under EIS. I'm not clear if the minority holding discount applies in that case or if the price of EIS investments already takes into account the lack of control and lack of liquidity that any individual investor has?

For example if my father invested 100k into EIS a week before he died would that be valued at around 100k or at around 10k for probate? I've not been able to find an answer on that...

For the EIS shares that he invested in over 2 years ago we get BPR so the valuation isn't important (though I presume we would have to follow the same methodology because in those cases a higher value would be better as it reduces any future CGT)