THE FINANCIAL
PRACTICALITIES OF BEREAVEMENT
Introduction
More than half a
million Britons die each year – around one per cent of the
population.
Many of these people
will have lived to a grand old age and may have put in place
arrangements – sometimes meticulous – for dealing with their
funerals, belongings and assets after they have gone.
But death is also a
subject that most people do not like to think about, so there
are also plenty of people who put off writing a will until it is
too late. This can be problematic as well as causing hardship
and deep upset to those left behind.
Unexpected deaths –
accidents or the tragic deaths of younger people – also mean
that families and friends can have responsibilities thrust upon
them at a time of acute personal distress.
The decisions and
arrangements bereaved people have to make can be complicated and
technical. This guide aims to offer practical help and advice to
those suffering bereavement.
While there is much
that bereaved individuals can organise for themselves – indeed
some people find being busy with the practicalities of a death a
helpful and necessary part of the grieving process – the guide
also explains where to go for expert technical help.
First steps when
someone dies
Most people die in
hospital. The required paperwork and official involvement
depends on the cause of death and where it occurs, whether in
Britain or abroad, and whether the individual was in care or
not.
The standard
formalities are that a doctor must provide relatives with a
certificate giving the cause of the death, and the death must
then be registered within five days at the Registry of Births,
Deaths and Marriages in the locality where the death occurred.
The local registrar will require a range of personal information
including the birth certificate of the deceased, medical card
and National Insurance details.
Importantly the
registrar will issue a Death Certificate, which is a copy of the
entry in the death register. This certificate – and it’s worth
getting a few original copies at the same time – may be needed
for bank, building society, life assurance and pension claims
and in many cases originals will be required. The registrar will
charge for these extra copies, but fees are lower than if you
apply for them later on.
The registrar should
also be able to give you a free and useful government booklet
‘What to do after a death in England and Wales’ (D49), or ‘What
to do after a death in Scotland’ (D49S) which are also available
from local offices of the Department of Work and Pensions or
Citizens Advice Bureaux or online.
Funerals
First, check the
death does not have to be reported to a coroner – which may
delay the funeral. Then find out if there is a will and whether
the deceased had any special requests for their funeral. Funeral
requests, however, are not binding and generally the nearest
relative, executor or administrator (see page 6) will decide
whether the body is to be cremated or buried.
Most funerals are
arranged by a funeral director, although they don’t have to be.
The deceased may
even have made arrangements in advance with a particular firm or
with a special policy to cover the costs. Check the papers of
the person who has died for details of any pre-paid plan; if
they had a financial adviser, they may have details of any
policies and other investments.
The only legal
requirements governing the disposal of a body in Britain are
that the death has been certified and registered, and the body
is properly taken care of by burying or cremation.
If you do use a
funeral director it is worth comparing costs. Funerals generally
cost £1,000 upwards.
But if there are
problems paying for the funeral, the government’s Social Fund
may help out. In particular, if your husband or wife dies and
you are claiming a means tested benefit, such as Minimum Income
Guarantee, you may be able to get help with the costs.
Wills
Wills allow someone
to formally leave instructions for the distribution of their
assets and often for their funeral intentions – and to
communicate these wishes without the potential distress or
difficulties of discussing them directly with relatives. It is
important that wills are updated as the individual's wishes
change. Wills also allow provision to be made for people who
perhaps wouldn’t otherwise benefit.
If there is a will,
the named executors need to seek what is known as probate from
the Inland Revenue. Once granted, the executors can deal with
the deceased’s estate.
Everyone should make
a will and then tell somebody else where it is kept. If you
believe that there is a will but can’t find it, contact
solicitors or banks the deceased may have used.
If someone dies
without a will, their assets are distributed according to the
rules of intestacy. This could mean assets and money going to
people the deceased had not wanted to benefit. It could also
lead to people who the deceased wanted looked after – unmarried
partners, for example – not inheriting, and even unnecessary
problems with inheritance tax.
Executors and
administrators
When a person dies,
someone has to sort out their estate – the money, property and
other possessions they have left. There may be money owed to the
deceased that needs collecting as well as debts and tax to be
paid before the remainder of the estate can be distributed to
the surviving family and other people who are entitled to it.
If there is a will,
executors should be named. If there is no will, this person, who
is normally the next of kin, is termed an administrator or
personal representative.
Sometimes the
deceased will have designated a solicitor or even their bank as
executors of their will as well as a relative. Personal
executors can also employ a solicitor, bank or other financial
firm which offers a probate or estate administration service to
help.
Executors have
important and time-consuming responsibilities. They will need to
produce full financial records of the estate, and they are under
a duty to ensure that the estate’s assets are paid to the
correct beneficiaries. If assets are distributed without all
debts having been paid, they may be held personally responsible.
To protect
themselves, they may need to advertise the death in a newspaper
for formal notices with a request that creditors submit their
claims by a date at least two months after the notice appears.
In addition, they
will need to apply for Probate – the legal process that gives
the right to distribute the assets to beneficiaries.
As a matter of
priority the personal representative should ensure any property
or assets of the deceased are secure.
Personal
representatives should inform the deceased’s bank, cancelling
personal credit and debit cards; switching or cancelling direct
debits and standing orders; and transferring joint bank accounts
into sole accounts (if necessary).
If the deceased was
a tenant, notify the landlord, council or housing agency and –
if required – give notice to end the tenancy. If the deceased
was living in a nursing or residential home but died in
hospital, give notice to vacate the room in the home.
Other people to
contact include the Department of Work and Pensions if the
deceased was receiving a state pension or other benefits. The
personal representative can claim any arrears of benefits owed
to the deceased for distribution as part of the estate. The
Department of Work and Pensions (formerly the DSS) will also
provide details of benefits available to any surviving partner
or dependent.
For tax, contact the
Inland Revenue or the deceased’s accountant. A refund may be due
to the estate or tax may be due in the future.
At this stage it is
also worth opening the deceased’s post as it may provide
evidence of assets or debts that might not otherwise be found.
What’s the estate
worth?
Determining the
value of the estate is the main responsibility of the executor
or administrator. Before you can apply for probate – the
authority to distribute the estate – you need to establish the
deceased’s total assets and liabilities. If the deceased was an
organised person, there may be a file of all their financial and
legal paperwork. If the deceased had a financial adviser, they
may also have details. Otherwise you may need to do some
detective work (see page 11 under Claiming Money Due).
You will need to get
valuations at the time of death for each asset.
The assets to be
added up are:
• any
property
•
possessions
•
bank/building society accounts
• shares
and other investments
• life
assurance policies (except for those written in trust which fall
outside the estate)
• pensions
• money
owed from others
• the
deceased’s share of jointly
owned assets.
Liabilities (which
will need to be paid before dividing up the estate) consist of:
• unpaid
bills
• credit
card debts
•
mortgages and other loans
• funeral
and cremation expenses
• probate
costs.
Inheritance tax
Executors are
responsible for reporting the value of the estate to the Inland
Revenue if there is or could be inheritance tax due. They are
also required to report any gifts made by the deceased of more
than £3,000 in the seven years up to the date of death.
The booming property
market means that more and more estates face inheritance tax –
the first £300,000 of an estate is free of inheritance tax then
the rest is taxed at an eye watering 40%.
For inheritance tax
purposes, your estate is made up of the value of all your assets
and possessions at the time of death, the proceeds of insurance
policies paid to your estate (other than ‘in trust’), plus any
‘Potentially Exempt Transfers’ the deceased may have made in the
previous seven years. Debts and reasonable funeral expenses are
then deducted (as are probate and other costs) to arrive at the
total of the estate.
Inheritance tax has
been dubbed the ‘avoidable tax’ – even after a death
beneficiaries can rewrite a will to reduce the inheritance tax
bill.
Wills can be
‘varied’ – rewritten for up to two years after a death. A
typical use is to reallocate assets from a spouse to children to
make fuller use of the £300,000 inheritance tax exemption as
transfers between husband and wife and civil partners have
unlimited exemption. The not-unusual practice of leaving
everything to the surviving spouse means the deceased’s
inheritance tax-free exemption is not used and often simply
postpones a bigger inheritance tax problem until later on.
Inheritance tax is
due to be paid within six months of the end of the month in
which the person died. Otherwise interest is added. In most
cases inheritance tax must be paid before probate/administration
is granted.
Claiming money due
Most adults probably
have some sort of life assurance – whether as part of a pension
scheme or in the form of an endowment or other savings policy
that includes such cover.
An independent
financial adviser (IFA) will be able to help you claim the
payout quickly and efficiently. An IFA will be able to help you
deal with financial companies and subsequently to advise you on
what to do with money and investments you inherit. The key
advantage of an independent financial adviser is that they can
advise on products from any company across the whole market and
provide suitable advice for you. To find IFAs in your locality
call 0800 085 3250 or visit www.unbiased.co.uk
There are also a
number of financial organisations that can help track down old
savings and pensions, which you believe the deceased may have
owned but for which you cannot find the paperwork or other
details.
The Unclaimed Assets
Register (6th Floor, Cardinal Place, 80 Victoria
Street, London, SW1E 5JL; 0870 241 1713; www.uar.co.uk)
specialises in searching for ‘lost’ financial assets. It
estimates that there is as much as £15 billion of unclaimed
savings, pensions, lottery and life assurance payouts.
The UAR charges £18
for a general search. 10% of these fees go to charity.
Both the British
Bankers Association (www.bba.org.uk) and the Building Societies
Association (www.bsa.org.uk) have free services for helping
trace old forgotten accounts.
The Pensions
Regulator provides a free service for pensions (The Pensions
Regulator, Napier House, Trafalgar Place, Brighton, BN1 4DW)
0870 241 1144. www.thepensionsregulator.gov.uk.
Probate
Probate gives
executors the necessary authority to gather in and distribute
the deceased’s assets. The length of time taken to obtain
probate varies depending on the complexity of the estate. When
you prove that probate has been granted to, for example, a bank
it will allow you to close the deceased’s account and withdraw
funds.
You or a solicitor
can apply for probate from the Probate Registry at
www.hmcourts-service.gov.uk.
Final accounts
Once you have
probate or letters of administration you can collect and
distribute the
deceased’s assets. The personal representative must now produce
final accounts – including expenses – for the residuary
beneficiaries (those getting whatever is left once specific
bequests have been made).
Finally, it may be
worth contacting a service called the Bereavement Register. This
removes the names and addresses (and even telephone numbers), of
people who have died, from databases and mailing lists, so
avoiding the upset and distress of inappropriate junk mail or
telemarketing. Call 0870 600 7222, asking for The Bereavement
Register Helpline or go to www.the-bereavement-register.org.uk
This guide is based
in IFA Promotion’s understanding of current legislation, which
is liable to change in the future. Procedures detailed above
relate to England and Wales and may differ elsewhere in the UK.
For further
information on the subject contained in this guide, please
contact your IFA.
