Dealing With Someone’s Finances After Death
When a loved one passes away, it is inevitably an emotionally distressing time, but if you are named as the administrator or executor of someone’s will, you will need to face the responsibility of dealing with the finances of the deceased sooner rather than later.
Facing the tasks of an administrator or executor can be daunting at first, but our guide will help you understand what to do when someone dies and the duties involved with handling an individual’s finances after death, from applying for probate to distributing the estate.
In this guide:
Everything that is owned by someone who has passed away is referred to as their estate. This can include their:
- Money (savings, cash, and insurance payouts)
- Property (any houses they own)
- Personal possessions (vehicles, expensive jewellery, etc.)
If the deceased owes money to anyone, perhaps in the form of a credit card, rent or a mortgage, the relevant amount is taken from the value of the estate.
So, who takes control of the estate when a person dies? It is typically handed over to surviving loved ones (relatives or close friends) in line with the instructions and preferences listed within the person’s will if an executor is named. If there is no will, then the rules of intestacy are implemented.
Note: The rules of intestacy are a set of specific guidelines on how an estate should be distributed if there is no will in place. They may not reflect the preferences of the deceased, which is why it is crucial that a will is written to avoid disputes and distress.
The person who is required to handle the distribution of the estate of the deceased is the ‘executor’ or ‘administrator’.
The executor will be named within the will if the deceased had one written, but they may still have to apply for probate – a legal process where the will is ‘proved’ in a court of law – before they can act on behalf of the person who has died.
If there is no will or the named executors refuse their responsibilities, an individual must then apply to be an administrator in order to be able to deal with the estate.
Aside from some exceptions, it is typically required that you have been granted probate or at least have letters of administration before handling the estate of someone who has passed away.
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In the UK, the administrator or executor of a will is responsible for handling the estate left behind by a deceased individual, including (but not limited to) the following:
- Registering the death and gathering copies of the will
- Organising all financial documentation
- Passing a copy of the death certificate to all relevant organisations
- Valuing the estate
- Opening an bank account for the estate
- Obtaining information on money owed to the estate and money owed by the person who has died
- Listing the property, money, possessions and debts in the estate
- Calculating the inheritance tax due and arranging the payment of it
- Completing documents required by HM Revenue and Customs and the probate registry
- Collecting the estate from banks, insurance providers, pension pots and building societies (once probate or letters of administration has been authorised)
- Paying any debts and fees (solicitor fees and probate charges)
- Distributing the estate in line with the will or the rules of intestacy
If the value of the estate does not cover existing tax, expenses, bills and other charges, you should seek advice from a solicitor. Solicitors themselves can, in fact, be listed as executors, which many find a viable option due to their experience in handling finances and complex issues.
If you have been named as an executor of someone’s will and either cannot act on their behalf or simply do not want to do so, you are able to appoint someone else to apply for probate on your behalf. To do so, you simply complete an attorney form from the GOV.UK website and send it with the probate application. You could also refuse to act without naming someone else to act on your behalf, which is called renouncing. You do so by completing a renunciation form, again from the GOV.UK website.
When someone dies, it’s important to organise their benefits, tax and National Insurance as soon as possible, as you may need to pay tax using the estate, or the estate might even be owed tax.
You should inform the tax office and each government office that was paying benefits to the person that they are now deceased. Depending on the circumstances, you might also need to report the death to the Department for Work and Pensions (DWP), which you can do by phoning the DWP Bereavement Service. They will then deal with all the relevant DWP benefits that were being paid and will even check whether the next-of-kin is entitled to any benefits.
If you ever feel out of your depth dealing with complex financial issues, remember that it is entirely possible to get help from a solicitor or another trained professional.
If the person who has died has left behind debts or overdrafts that need paying off, it is the responsibility of the executor to contact all relevant creditors.
As the executor, you should also enter a notice in The Gazette (the official public record of legal notices in the UK), which will notify creditors that they are able to make a claim against the estate to clear the debt. If you don’t do so and the creditors later make it known that they are owed money by the deceased, you may even have to pay the outstanding debt out of your own pocket.
In most cases, if the value of the estate is not sufficient enough to cover what they owe, creditors generally cannot ask anyone else (including surviving family members) to pay them. Joint debts, on the other hand, may be recovered from the surviving person, but remember to seek advice from a solicitor if things get complicated.
Many people have some sort of insurance policy in place that should pay off any of their debts when they pass away, so be sure to check this upon their death.
Probate is a legal process that must be undertaken to ‘prove’ a will in a court of law, meaning that it is accepted as an authentic document and a true representation of the final wishes of the person who has passed away.
When is probate required? If you are named in someone’s will as an executor, you may have to apply for probate to be granted the authority to handle the estate, which should be done before any of the property is touched. It is not always required, for example, if the estate is made up only of cash or the value is very low.
How long does probate take? There is no set time limit, but the whole process of probate usually takes months, rather than weeks. It can be a complex procedure and could even last up to a year.
Is probate required if there is a will? Yes, even with a will in place, you may still need to apply for probate.
Does a surviving spouse need probate in the UK? According to Citizens Advice, there is no need for probate or letters of administration unless there are assets that are not jointly owned.
Read more: What is Probate?
If the executors refuse to act, there are no executors named in the will, the will is not valid, or there is no will at all, then you will be required to apply for letters of administration to handle the estate of the deceased, rather than probate. Doing so will make you an administrator, not an executor.
There are, however, more restrictions regarding who can be an administrator.
If there is a valid will, you can make an application for letters of administration:
- If the deceased left their entire estate to you in the will
- If no executors are named
- If executors are named but are unwilling (or unable) to act
If there is no valid will and you are the next-of-kin, you can apply for letters of administration if (in order of priority):
- You’re married or in a civil partnership with the person who has passed away
- The person who has died is your parent
- The person who has died is your grandparent
- The person who has died is your son or daughter
- The person who has died is your sibling
- The person who has died is your auntie or uncle
- You are somehow related to the person who has died
If you have not been named as an executor in the will, there are unfortunately some cases where you may not be able to act as a will administrator, including being an unmarried partner, or a same-sex partner that has not registered a civil partnership.
As with probate, you do not always need a letter of administrator to handle someone’s estate. This includes circumstances where all of the property is made up of cash or you had a joint bank account with the person who passed away.
Once probate or letters of administration has been granted, you will receive a letter stating the amount of inheritance tax left to pay. Once this has been covered, official probate documents or letters of administration will be sent to you via post, including the details of the value of the estate before and after debts have been accounted for.
You also receive a copy of the will, which you are then legally able to use to manage the estate and distribute in line with the final wishes of the deceased.
The standard inheritance tax rate in the UK is 40% on anything above the tax-free threshold. In 2020, this threshold – or nil-rate band – is set at £325,000.
So, if the estate is worth £500,000 (including any properties, vehicles, cash, savings, pensions, insurance pay-outs, and so on), £175,000 of it will be taxable, which would result in an inheritance tax bill of £70,000.
Don’t worry; there are plenty of ways to avoid inheritance tax legally in the UK.
Read more: A Complete Guide to Inheritance Tax
If you’ve been listed as an executor, you don’t necessarily need a solicitor and you may want to act without one. But, if the estate is complicated and there are some issues that could arise that you’re not comfortable to handle yourself, you should always get legal advice from a trained solicitor – it’s their job, after all, so don’t feel like you can’t.
You might want to consult a solicitor if:
- The terms of a will are unclear
- Any of the estate is going to children under 18 years old
- The person who died owned property abroad
- Property or money has been placed in a trust
- There is a business that has been left to someone
- There is a dispute regarding the distribution of the estate
If you’re ever in doubt about anything or feel under pressure, be sure to seek legal advice. As we mentioned, you could even nominate the solicitor to take over proceedings completely if you are not able to do so yourself.