When a loved one passes, grief can feel all-consuming. Amid the emotional weight, the financial and administrative tasks tied to their estate demand swift attention.
The death of a loved one is always a difficult time, yet the financial and legal responsibilities that follow require clear-headed action.
The process can feel like a maze, from navigating probate to settling taxes and managing inherited assets. Acting promptly not only ensures their wishes are taken care of, but also brings peace of mind during a turbulent time.
This second instalment of our guide to end of life planning outlines the critical steps to manage the financial aftermath of loss. It covers the essential steps to take when bereavement strikes, helping you honour your loved one’s legacy while securing your financial future.
Wills, executors and applying for probate
The will is your starting point. It names the executor, the person tasked with carrying out the deceased’s wishes.
Check with the executor or solicitor to locate the will, typically stored with a solicitor, bank, or at home. If there’s no will, intestacy rules apply.
These rules establish a hierarchy for inheritance, typically favouring spouses or civil partners first, followed by children and other relatives. The person responsible must then apply for letters of administration to manage the etstate.
As an executor, your first task is to apply for probate, the legal right to manage the estate. In England and Wales, you apply through the Probate Service. The process costs £300 for estates over £5,000, with extra copies of the grant at £1.50 each.
Solicitors can handle this for you, especially for complex estates, though fees can vary significantly depending on the estate’s size.
Taxes, debts and benefits
Death doesn’t pause financial obligations. The estate must settle outstanding taxes, debts and halt unnecessary payments, such as benefits.
The Government now has what is called a ‘Tell Us Once’ service. Which means you don’t need to inform every relevant Government department of the death of a loved one. This saves having to repeat the same difficult conversation multiple times.
Be aware though (and check the link above), as the service requires quite a lot of pertinent information and documents.
Personal debts, such as credit cards or loans, are paid from the estate, not by relatives, unless they co-signed the debt. Secured debts, such as mortgages, may require selling assets if payments can’t continue.
A financial planner or solicitor can help to prioritise debts and liaise with creditors to avoid penalties during the process. It’s important to note that these decisions all come under the purview of an estate’s executor, who will be the one (or more) with legal permission to handle the process.
Managing property, bills and bank accounts
The deceased’s property and accounts need careful handling. Secure the home if it’s vacant, informing insurers to maintain coverage.
Redirect mail via Royal Mail to avoid missing critical notices if you don’t live near the property and can’t check the post regularly.
For joint bank accounts, ownership typically passes to the surviving holder, but sole accounts freeze until probate is granted. Ensure to notify banks to release funds for funeral costs if needed, as some allow this pre-probate.
Cancel subscriptions and direct debits that are no longer necessary to prevent unnecessary payments.
If the property is to be sold or transferred, a probate valuation is required. Bills, like council tax or utilities, may continue until the property is sold.
A solicitor can guide you through transferring property titles or managing tenancies, while a financial planner can advise on whether keeping or selling assets aligns with financial goals and your loved one’s wishes as stated in their will.
Managing the inheritance
Inheritance can be a financial lifeline or a burden if mismanaged. Once debts, taxes, and probate are settled, the remaining estate is distributed per the will or intestacy rules.
Navigating an estate’s complexities is daunting, especially under emotional strain. Solicitors ensure legal compliance, handling probate, property transfers, and disputes over the will.
Financial planners offer careful insight, planning for what to do with inherited assets and minimising tax liabilities. For complex estates or family disputes, professional financial planners can prevent costly mistakes as well.
A financial planner is invaluable for managing an inheritance. Not only will they be able to help you deal with the short-term requirements for the assets and money you inherit, but they can then help you align the inheritance with your long-term goals.
Financial planners can also advise on tax-efficient options, such as pensions or trusts, to further preserve wealth for future generations.
Inheritance tax
Inheritance tax (IHT) is a major concern for families. Estates valued above £325,000 face a 40% tax on the excess – though people’s homes are entitled to a higher threshold, which is called the residence nil-rate band , and adds £175,000 if the home passes to direct descendants. Married couples or civil partners pay no inheritance tax on homes that are passed on. These allowances are combined up to a total of £1 million for married couples.
The executor must calculate the estate’s value, including property, investments, and pensions, noting that pensions will be subject to IHT from April 2027.
HMRC requires IHT payment within six months of death, meaning executors may need to arrange loans or sell assets.
A financial planner can suggest strategies to minimise IHT and plan for its payment if due, but much of the preparation must be done before death in order to ensure there’s no accidental liability. Please check [part one] of this guide for more.
For more information on how you can minimise your IHT tax bill, please watch a recording from our recent webinar by clicking here.
Emotional consequences and acting promptly
Inheritances are a bittersweet gift from a loved one. But they can provide significant changes to your finances and open up new options, whether that’s clearing debts, funding retirement or investing for the future.
Bereavement brings a storm of emotions - grief, guilt, even relief if your loved one has been unwell for some time - that can cloud decision-making.
With the help of a financial planner, they can guide you on the path to closure. Settling the estate lets you focus on grieving and rebuilding. They can help to ensure the inheritance is managed in the best way possible and prevent rash decisions driven by grief.
Further, if it is possible, share responsibilities with co-executors or family to lighten the load and consider counselling through services like Cruse Bereavement Support to get help with the emotional toll.
Other charities such as Samaritans can also provide valuable counsel to those suffering from the emotional pain of a loss.
Moving forward
Handling the financial effects of bereavement can be a heart-wrenching duty thanks to a myriad of legal, financial and emotional challenges.
By addressing probate, taxes, debts and assets methodically, you can ensure your loved one’s wishes are carried out and protect your own stability. Expert help from solicitors and financial planners can ease the burden, while prompt action prevents complications.
Above all, tackling these tasks head-on grants the space to grieve and find peace, knowing the practicalities are in hand.
