How To Address Money Worries Following The Death Of A Loved One
The death of a loved one can be devastating. Something that often poses an additional burden, during an already overwhelming time, is organising your loved one’s financial affairs after death. To make the process easier, and hopefully alleviate some stress, we’ve detailed the common monetary issues families encounter following a family member’s death. What follows isn’t all inclusive but we’ve tried to cover key information, such as how to close bank accounts and what happens to outstanding loans.
Accessing/Closing A Deceased Persons Bank Account
You can inform the bank or building society of a death once you are in receipt of the following documents:
- The official will
- A death certificate
- A grant of probate (this is essentially written confirmation that you have the authority to deal with a dead person’s assets and estate. A specific person is appointed as executor of their financial affairs).
A grant of probate can be applied for via a solicitor or you can do this yourself directly. If your loved one left no official will, a letters of administration will be issued to their next of kin. This entails a similar application process to a grant of probate; however, you can only apply for this by post. More information about the application process for both can be found here.
Ideally, a grant of probate should take 3-5 weeks to be approved. However, this varies according to the circumstances. The process can also be slowed down if you make a mistake on the form.
Without a grant of probate or letters of administration it can be extremely difficult, if not impossible, to access the bank/building society account of a dead loved one.
There are some instances, however, where these documents might not be required:
- If the deceased person had limited funds in their account – some banks and building societies will release the money without a grant.
- Their properties, bank/building society accounts were joint owned by a surviving spouse or civil partner.
Individual Accounts Vs Joint Account
The documents detailed above will be required to formally close an individual current/savings account. It will remain open until these documents are presented and all the money in the account is retrieved. Direct debits and standing orders will be cancelled, however, as will online banking services.
It is important to know that withdrawing money from an open bank account of someone who has died, before you have informed the bank and been granted probate, is against the law. This is even applicable if you need to use the money for funeral payments. That said some banks, such as Lloyds, will grant you access to the bank account of a dead loved one if it is required for urgent expenses (i.e. funeral or probate funds).
It is the responsibility of the executor to withdraw and distribute any money from an individual account according to the will. A solicitor will usually help you with the process. If someone died without leaving a will, rules of intestacy
The only time this is not illegal to withdraw money from an open bank account of someone who has died is if you are the surviving person named on a joint bank account. In this instance, there is no need to wait for a grant of probate before accessing funds. Most joint accounts come with ‘rights of survivorship’. This means if you shared a bank account with a partner who’s died, as the survivor you can take full ownership of the account. Often, you will need to present their death certificate to your bank and the account will be changed so that it is solely in your name.
The terms of a joint bank account typically override that of the deceased persons will and isn’t counted as their ‘estate’. Therefore, they cannot leave the money within a joint account to anyone else other than the person they share it with.
Added considerations about bank accounts:
- When a loved one dies it is possible that you do not know the details of all their existing bank accounts. In that case, My Lost Account
is a useful tool for discovering these unknown bank accounts.
- The Death Notification Service is beneficial for informing several banks about a death with just one form. If your loved one had multiple bank accounts with various institutions, it removes the stress of having to notify each bank individually.
Outstanding loans, debts & repayment plans
When someone dies, any outstanding debts they had are paid out of their 'estate' (money and property they leave behind). Unless you had a joint loan or provided a loan guarantee, you are not automatically going to inherit the debt of a loved one who has died. Rather, it is the responsibility of the executor of the will to make sure the debt is paid off.
If your loved one was in debt or in the process of making repayments, here is what you should do next:
- Inform creditors that the person has died.
- Ask for a statement from the creditor confirming the outstanding debt amount.
- If you are the executor, pay the debts off in priority order. Naturally, secured debts such as a mortgage should be prioritised first. If you want to keep their property in your name, you will need to undergo a mortgage assessment to confirm you are able to take over mortgage payments. Following this, pay off reasonable funeral payments and the cost of administering the estate. Finally, focus on paying off unsecured debts such as credit cards, utility bills and unpaid rent.
If outstanding debts are too large to be paid off, then the biggest asset of the person who has died (usually a house) may need to be sold. In addition to this, a loved one’s debt can sometimes make it difficult to pay your own debts without the support of a second income.
More detailed information on dealing with death and debt can be found here.
Stocks and Shares
What happens to the stocks and shares held by someone who has died depends on the provisions they made while alive. If they were married and held joint stocks and shares then their surviving spouse typically becomes the sole owner. However, if stocks and shares were held individually then, ideally, they should have designated a beneficiary in their will.
If you inherit stocks and shares you can choose to keep them or redeem them. Before you can sell stock and shares left to you, however, ownership must be in your name and not in the deceased.
If you discover an old share certificate amongst your loved one’s belongings and want to know it’s worth, you can check this by going to the Companies House website. It will give you an address for the company (if it still exists). Next, you should write to the company secretary and ask for the name and address of its registrars: they look after a company's share register. You then need to contact the registrar to make sure you are on the list of shareholders. More information about inheriting stocks and shares can be found here.
Timeshares are a contentious issue. They are often considered a financial burden rather than a positive inheritance – they entail yearly maintenance fees and offer little inflexibility with regards to the date and destination of your holiday. Some timeshare contracts state the responsibility of payment will be passed on to the next of kin, as opposed to being annulled in the event of death. If your family member has stated in their will that they would like for you to inherit their timeshare, you are not required to accept it. This resource is helpful for next steps.
If your loved one was receiving a state pension, you must inform the Pension service so that their payments are stopped. Their helpline number is 0345 6060 0265.
If the person that has died was your spouse or civil partner, you might be entitled to extra payments from their state pension. This depends on the amount of national insurance (NI) contributions they made and when you reached the state pension age. In order to find out if you are eligible you will need to contact the Pension Service on 0800 731 7898.
Equally, it is advisable to check your loved one’s paperwork to see if they were paying in to any private or workplace pension schemes. If they did, contact the pension provider or their employer to find out how much and what to do next. If your loved one was still paying in to a pension when they died, the pension provider will probably request a copy of their death certificate.
The Money Advice Service offers more detail information about death and pensions here.
Inheritance tax does not apply if the value of your dead loved one’s estate is below the £325,000 threshold. Likewise, if the value of their estate is above that amount but they have left it to their spouse, civil partner, a charity or community amateur sports club, inheritance tax is not applicable.
Even if the estate of your loved one is below the threshold, you will need to report their estate to the HMRC. The standard inheritance tax rate is 40% and is only charged on the part of the estate that’s above the threshold. More detailed information can be found on the gov.uk website here.
We hope the above has been useful for you when it comes to arranging your loved one’s finances after death. Discover more information below about how to organise or close the following, associated accounts when someone has died:
Social Media Accounts
Leisure & Entertainment Accounts
The above is for your guidance only. Your relationship to the person who has died, i.e. whether you are married or not, might impact on whether the above advice is applicable to you.
You should always seek legal advice following the death of someone close to you.