Financial Planning

How to Manage the Money when Someone Dies

How to Manage the Money when Someone Dies

When someone you care about passes away, the days and weeks afterwards can feel like an overwhelming haze. The last thing you have the energy for taxes, inheritance or funeral arrangements – but they do need to be dealt with.

Where do you even begin with all of this? Who do you need to deal with in order to start sorting through the finances, and what can you expect from the whole process?


Getting started

When someone dies their assets are frozen in value. That includes the value of their investments, property, possessions (e.g. cars and jewellery) and pensions. Unfortunately, if the person has debts then these are not simply wiped. They still need to be dealt with.

In all likelihood, the most immediate financial concern you will need to address costs for the funeral. This will involve sorting through the deceased person’s financial affairs, which can get quite complicated (especially when you factor in inheritance tax). It’s usually a good idea to get help from an experienced financial adviser to help you navigate the process.

If you are the widow or child of the deceased then you might be entitled to financial support from the government during this difficult time. Have a look at the government’s bereavement web page to find out more.


Beginning the probate process

Probate refers to the process of sorting through the deceased person’s assets. This usually involves paying inheritance tax, clearing any outstanding debts and distributing the remaining assets of the estate.

This process is made much easier when there is a clear will which everyone can refer to. Otherwise, if no will exists then the estate usually will be divided up under the rules of intestacy, which are quite complicated. Quite often, this also means that the assets are not distributed in a manner which you might have expected.

For instance, if you are a child of the deceased then you might have expected an inheritance upon your parent’s death. Under intestacy rules, however, the estate usually ends up largely or completely in the hands of the deceased’s spouse or civil partner.

Assuming a will does exist, however, the responsibility for dealing with the deceased person’s estate will lie with the executors. You might well be one of the executors, possibly along with other people such as your brother(s) and/or sister(s).

To start sorting through the estate as executors, you will need to get permission from the government – known as “grant of probate”. Within five days of the death, you need to register the death with the authorities. It is also a good idea to buy several copies of this person’s death certificate, as you are likely to need quite a few of them later.

You will then need to go through the deceased’s paperwork to find out how much their estate is worth. This involves getting hold of bank statements, written records and relevant data files. You might need to contact banks, investment managers, pension scheme administrators and government departments directly to get the information you need.

As you can imagine, this is quite a stressful and long-winded process even in the best possible situation. Many estates are highly complex and quite often the paperwork you need can be quite difficult to get hold of. Having the help and backing of a professional firm can make the process much quicker and easier to manage.


Property & IHT

You might need to get a surveyor or estate agent in to value any property of the deceased. You might also require evaluations from other professionals for certain assets such as jewellery, valuable cars, artwork and other collectables.

Remember, you need to give notice to all relevant banks, building societies and government departments about this person’s death.

Once you have a broad grasp of the value of the estate, it’s time to fill out the probate application form (PA1) to start the process of obtaining the “grant of probate”. You will need to swear an executor’s oath at a solicitor’s office or nearby Probate Registry, so make sure you have valued the estate to the best of your ability.

You will then need to fill out the forms which deal with inheritance tax and pay the probate application fees (which are about £200). Once everything has been sent off to HMRC, they should hopefully approve your valuation of the estate.

If IHT needs to be paid to the government then this is usually the point where this needs to happen. This can sometimes be done via the deceased’s bank account – especially if the required funds are in the account. If a large portion of the IHT is tied up in property or investments then HMRC will usually accept a fraction of the total tax up front, and allow the rest to be paid off gradually.


Going forward from here

What we have described above is rarely the full picture or the end of the story. Quite often, unexpected hurdles and surprises can come up as you value the estate, which you might not know how to deal with. In many cases, it can be a struggle to get valuations of key assets and information from financial institutions without proof of probate.

The frightening thing for executors is that legally, they are responsible for any mistakes made during the probate process. So if you miss a debt which the deceased should have paid out of their estate, you might find yourself facing a difficult financial situation.

You can expect to spend at least fifty hours sorting through all of the administrative work as an executor – assuming you do not take professional advice. That’s fifty hours of complicated, tiring work where it would be easy to make a costly mistake. Therefore, it really does help to get advice from a professional who has traversed the probate process several times before, and can help you avoid the common pitfalls.

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