Dealing with the death of a loved one is always going to be hard. This guide explains what happens to someone's bank account and finances when they die, and what steps you need to take to get their financial affairs in order.
When someone dies, you must apply for probate before accessing their bank accounts unless you are a joint account holder on that particular account.
Aside from arranging the funeral, there are a number of steps you need to take before you can deal with the deceased’s financial affairs:
Register the death
Apply for probate
Remember inheritance tax!
Contact banks, utility companies and insurers
When someone dies, you should register the death within five days.
This is the only way to get a death certificate which you must have in order to access bank accounts of the person who died.
If the deceased left a will, they should have named an executor or administrator who will be in charge of handling the estate – that’s property, savings and belongings.
Once the executor has the original copies of the will and the death certificate (no photocopies allowed), they can apply for probate.
If someone dies without a will, the application process is the same, but you’ll get ‘letters of administration’ rather than a ‘grant of probate’.
Probate is the entire process for legally dealing with a deceased person's estate.
If the deceased's estate was jointly owned with a spouse or civil partner, probate may not be required.
You’ll need to estimate the value of the estate and report your findings to HMRC to determine whether or not inheritance tax (IHT) is owed.
IHT won’t be charged if the inheritance is left to a spouse, civil partner, charity, or amateur sports club – otherwise, IHT will apply on any estates valued at over £325,000.
For the 2019/2020 tax year, the minimum tax-free threshold increases to £475,000 if the estate was left to children or grandchildren, including step and adopted children.
It is usually the estate – not you as the executor and/or inheritor – who pays inheritance tax, which is due six months after the death.
Now you have the official will, death certificate and grant of probate (or letters of administration if there was no will), you can inform any banks, building societies, utility companies and insurers of the death.
Bank accounts remain open until all the money is retrieved and the account formally closed. However, direct debits and standing orders will be cancelled.
Remember, it is illegal to withdraw money from an open account of someone who has died (unless you are the other person named on a joint account) before you have informed the bank of the death and been granted probate. This is the case even if you need to access some of the money to pay for the funeral.
As the executor, it is down to you withdraw any money and distribute it to the beneficiaries according to the will. A solicitor will be able to help you with the process.
If someone died without leaving a will, rules of intestacy apply.
There is, of course, the real possibility you do not know the details of all the deceased’s bank accounts or that some details have been lost. In that case, there are online tools that can help you discover lost accounts.
Debts such as mortgages, loans or credit cards are not passed on to the inheritors, but must be paid off before the remainder of the estate is distributed as per the instructions laid out in the will.
If you are unsure of what or how much money is owed, you’ll need to place a notice in The Gazette – the official public record of deceased estates. If you fail to do this and a creditor later comes forward with a claim against the estate, you might personally be liable for the unidentified debt.
Two months and one day after the notice is published and provided no other creditors have come forward, you can distribute the remaining estate amongst the beneficiaries.
Any debts taken out in a joint name become the sole responsibility of the survivor when one of you dies.
Any open insurance policies need to be cancelled – remember, unless a claim is made, insurance companies do not pay out, so you will not recoup any payments the deceased made as part of their policies.
However, if they had any kind of life insurance (including mortgage life insurance and PPI) you can make a claim.
If the deceased was receiving their State Pension before they died, contact the Pension Service to stop the payments.
You may be able to claim their personal or workplace pensions (if they had any), but how much you’re entitled to largely depends on the type of pension they had.
If a bank account is held in a lifetime trust, the successor trustee named in the trust document can present the death certificate and a copy of the trust to the bank to take it over.
While much of the advice in this guide is about how to manage someone else’s finances once they have died, there are several small things you can do for yourself or the person you are caring for now.
Special counsel at Foley & Lardner, Jamil G. Daoud, offers the following tips:
Consolidate accounts. This might not be possible if the person has created a complicated web of savings accounts, but if there is a savings account here and a current account there, merging them could simplify matters.
Get a Grant of Probate. The bank will request to see a ‘Grant of Probate’, which the executor or administrator of the will can apply for on the .GOV website. They will then take this to the bank. This is so that the bank can make sure that they are releasing the money to the same person that the deceased has requested.
Pre-plan your funeral, if you can. One of the main reasons people need quick access to a person’s bank account after they have died is to cover the arrangements. Planning ahead alleviates that stress during an emotional time.