Managing finances in bereavement

What is an executor?

Being named as an executor is an important role, and it can feel like a big responsibility — especially at an already difficult time.

It involves tasks such as organising the funeral, managing assets, settling any debts, paying any inheritance tax due and distributing what’s left to beneficiaries.

Many people choose to get support from a solicitor, accountant or financial adviser, particularly if the estate is complex. You don’t have to do everything on your own.

If someone dies without a Will (known as dying intestate) an administrator will need to be appointed. This will usually fall to the closest living relative.

Here are the steps involved when dealing with an estate:  

Step one: Tell financial providers

Among the first jobs for an executor is to get the death certificate and organise the funeral (the expenses for which can be taken out of the estate if there are sufficient funds).

The executor should inform all relevant bodies and organisations, such as banks, insurers, pension providers, and government (for pension benefits and tax, for example). 

This task can be incredibly difficult, depending on the circumstances, so getting someone to help you and taking your time, working through a list of priorities, can make things easier. Tell providers if you need more support.

For bank accounts, savings, investments and pensions, you’ll need to show the provider the death certificate so it can begin the process of closing the account and transferring funds to the executor. 

Each provider will have their own process, and many will have a dedicated bereavement team who can help you through the necessary steps. Ask for extra help if you need it.

Step two: Value the estate and apply for grant of probate

Probate is the formal, legal process by which an estate is passed on to beneficiaries.

If a spouse dies and leaves their estate (including shared property and shared accounts) to their surviving spouse (or civil partner) then sometimes probate may not be needed. But in most situations probate is necessary and advisable, even for smaller-sized estates. This is because probate is legally binding and protects beneficiaries from subsequent disputes by other potential heirs. 

Probate is also usually required for solely owned and higher value assets, even where the intention is that they are passed to a surviving spouse.

However, before the executor can apply for the grant of probate,  they’ll need to value the total estate. If inheritance or estate taxes are applicable in that jurisdiction, the valuation typically needs to be reported to the relevant tax authority within a set timeframe after death. Rules and deadlines vary by country, so it’s important to check local requirements. In the UK for example, if inheritance tax (IHT) is due on the estate, the estate valuation must be provided to HMRC within one year of the death. Despite this, the tax itself must be paid to HMRC by the end of the sixth month after the death, in some cases before people will have secured a formal valuation. If payment is late interest will accrue on the tax bill. The current interest rate (accurate as of date of publication) is 7.75%. Executors of an estate are responsible for reporting when IHT is owed on an estate, as well as paying the tax bill.

There are a range of other circumstances where an estate value will need to be reported to HMRC, including where substantial gifts have been made within seven years prior to the death, or where the deceased had foreign assets worth more than £100,000, for example. More information on when an estate must be reported to HMRC is available on its website.

You can apply for probate online or by post (noting that depending on the circumstances, such as not having the original Will, it may sometimes not be possible to apply online). 

At this point it may be preferable to set up an executor’s bank account. This is to keep any money from the estate (which is in the process of being transferred to the executor) separate from the executor’s own finances.

Pensions and UK IHT

From April 2027, unused pension assets will fall into a deceased’s estate for UK IHT purposes. This means executors (and administrators of an estate) will need to get valuations of all eligible pension assets before calculating the tax due on the total estate.

Step three: Distribution of the estate 

Once all tax bills have been paid in full the executor can distribute the estate to beneficiaries as laid out in the Will. This is likely to involve transferring ownership of some assets, for example, which can be done by sending the grant of probate to the relevant providers.

Consider closing the executor bank account once the estate has been distributed. This avoids the potential for fraudsters to access the account.

Asking for help

If you have recently lost someone close to you, it is likely to be particularly difficult dealing with their finances on top of everything else. 

Ask for help when you need it, whether that’s from individual financial providers, such as banks and insurers, your financial adviser, or a solicitor. 

Disclaimer:

This advertisement has not been reviewed by the Securities and Futures Commission, the Monetary Authority of Singapore, or the Dubai Financial Services Authority. This article is a general communication that is provided for informational purposes only. It should not be relied upon as financial advice, and it does not constitute a recommendation, an offer or solicitation. No responsibility can be accepted for any loss arising from action taken or refrained from based on this publication. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given, and no liability in respect of any error or omission is accepted.