Business valuation for deceased estates and probate
An estate holding a business interest needs that interest valued at the date of death, for probate, for the executor’s administration and for the eventual distribution to beneficiaries. The valuation date is fixed by the death, not by when the executor gets to it.
Executors carry a personal duty to administer the estate properly, and a business interest is usually the hardest asset in it. An independent valuation at the date of death protects the executor, gives beneficiaries a basis to accept the distribution, and establishes the cost base that will matter years later.
The brief
Who reads it, and what it has to satisfy
The purpose sets the standard of value, the level of documentation and the person the report has to convince. Getting that wrong is the most common reason a valuation is rejected.
The executor and their solicitor, the beneficiaries, and the court where the estate is contested.
Market value at the date of death, on the basis of the interest actually held by the deceased.
The date of death — with information available at that date, and later events excluded from the reasoning.
What the report must contain for this purpose
- The interest held by the deceased, defined precisely
- Market value at the date of death, with information limited to that date
- The effect of the death itself on the business, assessed rather than ignored
- Personal versus transferable goodwill, addressed explicitly
- Any discount for a non-controlling interest, with reasoning
- A signed valuer declaration suitable for the court and the beneficiaries
Sequence
How an estate valuation runs
Executors are usually working to a timetable set by others. Tell us the date you need it by.
-
01
Establish what the deceased held
Shares, units, a partnership interest or a sole trader business — and whether it passed by the will, by survivorship or under a deed.
-
02
Value at the date of death
On information available then. Where the business was heavily dependent on the deceased, that dependence is part of the valuation, not an afterthought.
-
03
Assess continuity
Whether the business can continue, who is running it, and what the death did to customer relationships, licences and key contracts.
-
04
Report for administration
A report the executor can rely on for probate, for negotiating with beneficiaries, and for the eventual sale or transfer.
Where it goes wrong
What executors get caught by
A business interest is rarely the asset an executor expected to be dealing with, and the errors are consistent.
The executor’s exposure
An executor who distributes on an unsupported value, or who allows a business asset to deteriorate while deciding what to do with it, may be personally answerable to the beneficiaries. An independent valuation at the date of death is the ordinary protection against both.
- Using the accountant’s balance sheet Net assets at book value is not market value, and for a trading business it is not the value of the interest either. Beneficiaries who later see a sale price will ask why.
- Valuing at the wrong date Value at the date of death is what the estate requires. A valuation twelve months later, after the business has deteriorated or recovered, answers a different question.
- Ignoring what the death did to the business Where the deceased was the licence holder, the principal fee earner or the relationship with every major customer, the interest may be worth far less than the last set of accounts suggests.
- Treating a minority holding as a proportionate share A 30 per cent parcel with no control and no market is not 30 per cent of the company’s value, and beneficiaries deserve to understand why.
- Delay Businesses without their principal deteriorate quickly. An executor who waits six months to find out what the asset is worth frequently finds it is worth less.
What we need
Documents for this engagement
Executors frequently do not have full access to the business records at first. We work with what exists and identify formally what is missing.
Open the standard checklist →- Death certificate and grant And the will or letters of administration
- Financial statements — three years For each entity in which the deceased held an interest
- Share register, trust deeds and agreements Establishing exactly what was held and on what terms
- Buy–sell or succession agreements Any arrangement triggered by death, including insurance-funded provisions
- Details of the deceased’s role What they did in the business day to day
- Post-death trading information To assess continuity, disclosed as such rather than used in the valuation
The date of death. That is the date the estate’s assets are assessed at for probate and for establishing the cost base of the interest passing to beneficiaries. Later events are relevant to the executor’s decisions but are excluded from the valuation reasoning, and where we refer to them the report says so explicitly.
Possibly much less than the accounts suggest, and that is a finding the estate needs. Where clients dealt with a person, where a licence was held personally, or where the deceased was the only qualified practitioner, a large part of the goodwill did not survive them. The valuation assesses what is transferable and says plainly what is not.
A valuation by an independent Certified Practising Valuer, prepared to a documented methodology, is ordinarily accepted and is what an executor is expected to obtain. Where a beneficiary disputes it, the report’s reasoning is visible and testable, which is precisely the point of getting one.
Yes, in-house. Estates commonly hold a trading business, the premises it operates from and the plant inside it. Asset Valuations Group values all three within one engagement and one consistent set of assumptions.
It raises the standard. Where litigation is on foot or likely, the report is prepared to expert evidence standards — instructions recorded, assumptions disclosed, requests for information documented — so it can be relied on in the proceeding rather than replaced.
Reviewed by a Certified Practising Valuer
Reviewed by Jarrad Khoury, Director and Head of Valuations — Registered Valuer (QLD, Not Limited), Licensed Valuer (WA, Not Limited), CPV and CBV. Published by Business Valuations Brisbane, the business valuation division of Asset Valuations Group.
Last reviewed
Value the interest at the date it has to be valued.
A free 15-minute scoping call, then a fixed fee in writing. No obligation, and nothing you send leaves our office.
1300 778 033