Deceased Estate & Executor Valuations

Estate Administration and CGT Cost Base

Why Executors Need Independent Valuations

An executor or administrator holds the deceased’s assets for the beneficiaries and must administer the estate properly. Where the estate includes a business, a company interest, a trust interest, a property or any other asset without a readily observable price, the executor cannot distribute, sell, or account to the beneficiaries without knowing what those assets are worth.

The valuation does work in several directions at once. It establishes the value of the estate for administration and for accounting to beneficiaries. It fixes the cost base that the beneficiary inherits for capital gains tax purposes, which determines the tax payable on an eventual sale — sometimes decades later. It underpins any unequal distribution, family agreement or deed of arrangement between beneficiaries. And where the estate is contested, whether through a family provision claim or a challenge to the will, it becomes evidence.

The exposure for the executor is personal. An executor who distributes on the basis of a value that turns out to be wrong, who sells an asset to a beneficiary at an undervalue, or who cannot substantiate the figures when a beneficiary questions them, may be personally liable to the estate. That risk is managed by obtaining independent valuations and documenting them — not by forming a view based on what the accountant says the business is worth.

The timing pressure is real and works against good practice. Executors are frequently under pressure from beneficiaries to distribute quickly, and valuation work is one of the things that gets deferred or skipped. A valuation obtained at the right date, before distribution, costs a fraction of the disputes and tax consequences it prevents.

InteleK’s accredited valuation specialists prepare independent valuations for deceased estates — business and company interests, trust and partnership interests, and other assets requiring valuation for estate administration, CGT cost base, and contested estate proceedings.

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Purchase Price Allocation (PPA) (ASC 805 Business Combinations & ASC 820 Fair Value Measurement)

When a Valuation Is Required

At the Date of Death

The primary valuation date. The estate’s assets are valued as at the date of death for administration purposes, and this is the date that fixes the CGT position for most inherited assets.

A valuation is generally needed where the estate includes:

  • A business, professional practice or partnership interest
  • Shares in a private or unlisted company
  • Units in a private unit trust, or an interest in a discretionary trust
  • Real property, including business premises and investment property
  • Intellectual property, royalty interests or licences
  • Loans receivable, particularly to related parties
  • Collectables, artwork or other specialty assets
  • Interests in self-managed superannuation funds where the fund holds unlisted assets

Listed securities and cash need no valuation. Everything else generally does.

At Distribution or Transfer

Where an asset is distributed in specie to a beneficiary, or transferred between beneficiaries, its value at the date of transfer matters for the fairness of the distribution and for the beneficiaries’ own positions. Where assets have moved materially since death — a common situation where administration takes a year or more — the date-of-death value no longer reflects what beneficiaries are receiving.

On Sale to a Beneficiary or Related Party

Where the executor sells an estate asset to a beneficiary, to a family member, or to an entity connected with either, the transaction lacks the arm’s length character that would ordinarily establish the price. An independent valuation is what protects the executor from a claim that the asset was sold at an undervalue, and it is the evidence the ATO would look for if the transaction were reviewed.

For Family Provision and Contested Estates

Where a claim is made under the family provision legislation, the Court needs to know the size of the estate before it can assess whether adequate provision was made. In a contested matter the valuation becomes expert evidence and must be prepared to the standard the Court requires.

For Unequal or Negotiated Distributions

Where the will leaves the business to one child and other assets to another, or where beneficiaries negotiate a deed of family arrangement, the relative values determine whether the outcome is what the will intended or what the parties believe they have agreed. Family disputes frequently originate in a business value that was never independently established.

CGT and the Deceased Estate

The capital gains tax treatment of inherited assets is where the valuation has its longest-lasting effect, because the cost base the beneficiary inherits determines the tax on a sale that may be many years away.

The General Position

Death itself does not usually trigger CGT. A capital gain or loss from a CGT event arising on death is generally disregarded where the asset passes to the legal personal representative or to a beneficiary. What happens instead is that the recipient inherits a cost base determined by the rules — and which rule applies depends on when the deceased acquired the asset and what kind of asset it is.

Post-CGT Assets

For assets the deceased acquired on or after 20 September 1985, the beneficiary generally inherits the deceased’s cost base — the historical cost base rolls over rather than being reset.

This is the point most commonly misunderstood. For a post-CGT asset, the date-of-death value is not the beneficiary’s cost base. The deceased’s original acquisition cost, plus the elements of cost base incurred since, carries through. The date-of-death valuation is still needed for administration, for the beneficiaries’ relative entitlements and for the executor’s accounting, but it is not the figure that determines the eventual tax.

Pre-CGT Assets

For assets the deceased acquired before 20 September 1985, the beneficiary generally takes a cost base equal to the market value at the date of death.

Here the date-of-death valuation is directly and permanently consequential. A business established before September 1985, a property bought in the 1970s, shares in a long-held family company — the value at death becomes the beneficiary’s cost base, and every dollar of that valuation is a dollar of future capital gain avoided or incurred.

Pre-CGT assets are where a valuation obtained years after death, reconstructed from incomplete records, causes the most damage. The asset may not be sold for another twenty years, and by then substantiating a date-of-death value is very difficult.

The Main Residence

The deceased’s main residence has its own rules, with a full or partial exemption available depending on how the property was used by the deceased and by the beneficiary or occupant after death, and on whether it is disposed of within the period allowed. A valuation at the date of death is frequently required, particularly where the property was used to produce income or where the exemption is partial.

Superannuation Death Benefits

Superannuation is not part of the estate unless it is directed there. Where an SMSF holds unlisted assets — a private company interest, business real property, a related unit trust — the assets need valuing for the fund’s own purposes and to determine the death benefit payable. That is a separate exercise from the estate valuation, though the underlying asset may be the same.

Two Points for the Tax Adviser

Whether an asset is pre-CGT or post-CGT, and what the deceased’s cost base actually was, are tax questions requiring the deceased’s records. The valuer provides the value; the tax adviser determines which rule applies and what the resulting position is. Both are needed, and the tax analysis should come first, because it determines whether the date-of-death valuation is the beneficiary’s cost base or merely an administration figure.

Valuation Considerations Specific to Estates

The Business Without Its Principal

The most difficult problem in estate valuation, and the one with the largest effect on value.

Where the deceased was the business, the value at the date of death has to reflect the fact that the person who generated the earnings is no longer there. The distinction between commercial and personal goodwill is the same one that arises in family law, but here it is starker: the principal has not departed hypothetically, they have died.

A sole practitioner professional practice may have little transferable value beyond net tangible assets and work in progress. A business with employed managers, systems, contracted revenue and a client base that contracts with the entity may retain most of its value. The analysis requires examining what actually happened to the business after death, alongside what was reasonably foreseeable at the date of death — the two are not the same, and the valuation is as at the date of death on what was then known or knowable.

Key Person Risk Crystallised

Related but distinct: even where goodwill is commercial, the loss of the principal may have damaged the business — customer relationships in transition, staff uncertainty, loss of a licence or accreditation held personally, breach of a contract or loan covenant triggered by death.

Where key person insurance was held, its proceeds form part of the estate or the company’s assets depending on the ownership structure, and the interaction with the business value needs to be handled without double counting.

Minority Interests in Family Companies

Estates frequently hold minority parcels in family companies where the majority is held by other family members — often the very beneficiaries with whom the estate must deal.

Whether a minority discount applies is genuinely contested in this context. A parcel sold to an outside party would attract one. A parcel being distributed to a beneficiary who already holds the balance would give that beneficiary control, which argues the other way. And where the estate must sell to the family because no outside market exists, the discount question becomes the dispute.

The position needs to be reasoned from the circumstances, and where it is material the valuation should quantify both bases.

Assets Held Through Structures

Family assets are commonly held through discretionary trusts, and a discretionary beneficiary has no proprietary interest in trust assets — so what forms part of the estate may be control of the trustee company, or an appointor power, rather than the underlying assets themselves.

This is a legal question before it is a valuation question, and it needs to be resolved by the estate’s solicitor before the valuation is scoped. Valuing trust assets as estate assets when they are not is a common and expensive error.

Restricted and Illiquid Assets

Shareholder agreements with pre-emptive rights or compulsory transfer provisions triggered by death, partnership agreements with buy-out formulas, and constitutional restrictions on transfer all affect what the interest is worth and to whom. Where a binding agreement fixes a price on death, that may be determinative for administration — but not necessarily for tax, where market value applies.

Contested Estates and Expert Evidence

Where the estate is in dispute, the valuation becomes expert evidence and must meet the requirements applicable in the relevant Supreme Court — an overriding duty to the Court, disclosure of qualifications and instructions, reasoning set out so it can be tested, and identification of material limitations. Practice notes differ by jurisdiction and should be confirmed with the instructing solicitor.

Family provision claims require the Court to know the size and composition of the estate, including notional estate in jurisdictions where that concept applies. The valuation is foundational to the claim rather than incidental to it.

Challenges to the will and claims against the executor’s administration frequently turn on whether assets were properly valued and whether the executor obtained independent advice. An executor who obtained a contemporaneous independent valuation is in a substantially better position than one who did not.

Common Failure Points

  • Date-of-death value assumed to be the beneficiary’s cost base for a post-CGT asset, when the deceased’s cost base carries through
  • No date-of-death valuation for a pre-CGT asset, where that value permanently determines the beneficiary’s cost base
  • Valuation obtained years after death, reconstructed from incomplete records, where the asset is not sold until much later
  • Personal goodwill valued as though the principal were still alive
  • Accountant’s opinion relied on, where the accountant acted for the deceased and continues to act for one beneficiary
  • Minority discount applied or omitted by default in a family company, rather than reasoned
  • Trust assets treated as estate assets where the deceased held only a discretionary interest or a control position
  • Shareholder agreement buy-out price treated as market value for tax purposes
  • Distribution made before valuation, leaving the executor exposed if a beneficiary later disputes the allocation
  • Sale to a beneficiary without independent valuation, exposing the executor to an undervalue claim
  • Key person insurance double counted with the business value

InteleK’s Approach to Estate Valuations

Our accredited valuers prepare independent valuations for executors, administrators and estate solicitors. Here’s what sets our process apart:

Valued at the Right Date, Properly — Date of death for administration and CGT, and at distribution or transfer where those matter separately. Where records are incomplete we say what we could and could not establish, rather than presenting a reconstruction as though it were contemporaneous.

Personal Versus Commercial Goodwill, Assessed Honestly — Whether the business retained value without the deceased, analysed by reference to how clients contracted, whether other fee earners or managers existed, what contracted revenue survived, and what the market for comparable businesses actually pays. This is frequently the difference between a substantial estate value and a modest one, and it needs to be right in both directions.

Minority Discount Reasoned, and Quantified Both Ways — Where an estate holds a minority parcel in a family company, we address whether a discount is appropriate on the facts and, where it is material, provide both bases so the executor and the solicitor can take a position on an informed footing.

Independent of the Beneficiaries — We act for the executor, not for any beneficiary, and we have no prior relationship with the business or the family. Where beneficiaries are in conflict, that independence is what makes the valuation usable by all of them.

Scoped With the Estate Solicitor First — What actually forms part of the estate, particularly where trusts and control positions are involved, is a legal question that determines what we value. We establish it before scoping rather than assuming.

Coordinated With the Tax Adviser — Whether an asset is pre-CGT or post-CGT determines whether our date-of-death value becomes the beneficiary’s cost base or is an administration figure only. We work with the tax adviser so the valuation answers the question that matters.

Documented for Later Scrutiny — Estate valuations are often examined years afterwards, by a beneficiary, by the ATO on an eventual sale, or in a claim against the executor. Every assumption sourced and every judgement explained, structured to be read cold by someone who was not there.

Expert Evidence Where Required — Where the estate is contested, valuations prepared to the standard the Court requires, with attendance at conferences and evidence given where needed.

Working With Your Advisers — Alongside the estate solicitor, the tax adviser and the accountant. Estate valuations that cause problems usually caused them because the scope was set without the legal and tax positions being settled first.

Deceased Estate Valuation FAQs

Expert insights for executors and estate solicitors — date of death valuations, CGT cost base, business goodwill after death, and executor liability.

⚠️ General information only, and not legal or tax advice. What forms part of an estate and how it is taxed turn on the specific circumstances — InteleK Business Valuations & Advisory Pty Ltd recommends executors engage an estate solicitor and a registered tax agent alongside any valuation.

Search Deceased Estate & Executor Valuation Topics
Anything without a readily observable price. Listed securities and cash need nothing; most other things do. In practice that means a business, professional practice or partnership interest, shares in a private or unlisted company, units in a private unit trust, real property including business premises, intellectual property and royalty interests, loans receivable particularly to related parties, collectables and artwork, and interests in a self-managed super fund holding unlisted assets. The executor cannot distribute, sell or account to beneficiaries without knowing what these are worth.
Because an executor holds the assets for the beneficiaries and must administer the estate properly. An executor who distributes on a value that turns out to be wrong, sells an asset to a beneficiary at an undervalue, or cannot substantiate the figures when a beneficiary questions them, may be personally liable to the estate. That risk is managed by obtaining independent valuations and documenting them contemporaneously — not by forming a view based on what the deceased's accountant says the business is worth.
Only for some assets, and this is the most commonly misunderstood point in estate administration. For assets the deceased acquired on or after 20 September 1985, the beneficiary generally inherits the deceased's own cost base — the historical cost rolls over rather than resetting to the date of death value. For assets acquired before that date, the beneficiary generally takes a cost base equal to the market value at the date of death. Which rule applies is a tax question that needs the deceased's records and a tax adviser's analysis.
Because for an asset acquired before 20 September 1985, the date of death value becomes the beneficiary's cost base permanently — every dollar of that valuation is a dollar of future capital gain avoided or incurred. A business established in the early eighties, a property bought in the seventies, shares in a long-held family company: the value established at death determines the tax on a sale that may be twenty years away. These are the assets where failing to obtain a contemporaneous valuation causes the most damage, because reconstructing a date of death value decades later is very difficult.
Because the valuation does more than fix a cost base. It establishes the size of the estate for administration and for the executor's accounting to beneficiaries, determines relative entitlements where the will divides assets unequally, underpins any deed of family arrangement, supports any sale or in specie transfer, and becomes evidence if the estate is contested. The tax treatment of a post-CGT asset is unaffected by the valuation, but almost everything else the executor has to do depends on it.
Often not, and this is the hardest problem in estate valuation. Where the deceased was the business, the value at the date of death has to reflect that the person generating the earnings is gone. A sole practitioner practice may have little transferable value beyond net tangible assets and work in progress. A business with employed managers, systems, contracted revenue and clients who contract with the entity rather than the individual may retain most of its value. The analysis turns on what was transferable, assessed as at the date of death on what was then known or knowable.
Carefully. The valuation is as at the date of death, on what was known or reasonably foreseeable then — so subsequent events cannot simply be read back into the value. But what actually happened is informative evidence about what was foreseeable: if the client base dispersed within six months, that tells you something about how transferable it was. The distinction matters, and a valuation that quietly uses hindsight as though it were foresight is vulnerable if a beneficiary or the ATO examines it.
It is genuinely contested in this context and needs reasoning from the facts. A parcel sold to an outside party would attract a discount. A parcel being distributed to a beneficiary who already holds the balance would give that beneficiary control, which argues the other way. And where the estate must sell to the family because no outside market exists, the discount question often becomes the dispute itself. Where it is material, the valuation should quantify both bases so the executor and the solicitor can take an informed position.
Often not, at least not directly. A discretionary beneficiary has no proprietary interest in trust assets, so what passes through the estate may be control of the trustee company or an appointor power rather than the underlying assets themselves. That is a legal question the estate solicitor must resolve before any valuation is scoped — valuing trust assets as estate assets when they are not is a common and expensive error, and it can lead to a distribution that does not reflect what the beneficiaries actually received.
For administration purposes a binding buy-out mechanism may well determine what the estate actually receives. For tax purposes, market value applies — and an agreement formula never tested against the market is not necessarily market value. The two can differ substantially, which means the executor may need both figures: what the estate will receive under the agreement, and what the interest was worth for cost base purposes. Pre-emptive rights and compulsory transfer provisions triggered by death should be reviewed by the solicitor early.
Their records are essential and their cooperation matters, but a valuation from them is weak evidence. The accountant typically acted for the deceased, often continues to act for the business and for one or more beneficiaries, and prepared the financial statements the valuation is built on. Where beneficiaries are in conflict — which is common — a valuation from someone with an existing relationship to one side will not be accepted by the other, and it does little to protect the executor if the distribution is later challenged.
It is the wrong order and it is where executors get into trouble. Beneficiaries frequently press for a quick distribution and valuation work is what gets deferred — but once assets are distributed, an executor who allocated on a wrong value has limited options and personal exposure. A valuation obtained at the right date, before distribution, costs a fraction of the disputes and tax consequences it prevents. If the pressure to distribute is real, a partial distribution of clearly divisible assets is usually a better answer than skipping the valuation.
An independent valuation, obtained before the sale. A transaction between the estate and a beneficiary lacks the arm's length character that would ordinarily establish the price, so there is nothing to demonstrate the asset was not sold at an undervalue except the valuation. It protects the executor from a claim by the other beneficiaries, and it is the evidence the ATO would look for if the transaction were reviewed. This is the single situation where executors most often proceed without one and most often regret it.
The valuation becomes expert evidence and must meet the requirements applicable in the relevant Supreme Court — an overriding duty to the Court, disclosure of qualifications and instructions, reasoning set out so it can be tested, and material limitations identified. In a family provision claim the Court needs to know the size and composition of the estate before it can assess whether adequate provision was made, so the valuation is foundational rather than incidental. An executor who obtained a contemporaneous independent valuation is in a substantially stronger position than one who did not.
Not too late, but harder and weaker than doing it at the time. A valuation can be prepared as at the date of death using evidence contemporaneous to that date — financial statements, contemporaneous market data, the client and contract position as it stood. What is lost is access to people's recollection while fresh, records that may since have been discarded, and the credibility that comes from a valuation prepared before anyone knew what was in dispute. Where a pre-CGT asset is involved, a retrospective valuation is still far better than none.
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