How do you deal with finances when someone dies?
The death of a family member or loved one can be extremely difficult and emotionally draining. As such, dealing with finances when someone dies can lead to further distress if you’re unaware of what to do.
The possessions belonging to someone who has passed away are known as their estate. An estate can include money, shares, property, and other personal items such as jewellery and vehicles.
A person who deals with the finances of someone who has died is called an administrator or executor and they will be legally responsible for the estate until the process is complete. In order to be able to deal with the estate of someone who has died you may need to apply for probate, which is the legal right to deal with a person's estate when they die. Below is an outline of what an administrator will need to do when dealing with the finances of someone who has died.
1. Register the death and notify relevant organisations
The first step to take when someone dies is to register the death. You may also need to notify government agencies such as the Department of Works and Pensions (DWP
) in order to sort out their benefits, National Insurance, and tax. It is possible to inform several governmental departments of a person’s death using the “Tell us Once” service.
2. Gather all Financial Documents
As the executor of an estate, the next step you will need to take is to gather all the financial documents relating to the person who has died. You can do this by notifying any relevant organisations of the person's death, including banks and any other entities where they held their assets.
Once you have all the relevant financial information you can then prepare a detailed inventory of the estate. This should include property, cash, any money owed to the estate, as well as debts and inheritance tax due, if any. Your responsibilities as the administrator of an estate once you have gathered the financial information will include the following:
- Prepare a detailed list of their possessions, money, debts, and property.
- Find out what the person who has died owed in liabilities and if they are owed any money.
- Notify HMRC and pay any inheritance tax, if any is due.
- Pay off debts and expenses such as funeral costs and solicitors fees.
- Distribute the estate as detailed in the Will, or according to the intestacy rules.
3. Open a Bank Account
Once you have a clearer picture of the estate's value, you may need to open a bank account on behalf of the estate. This is the account you will manage the estate's finances when you sell any assets such as property or shares, as well as receive payments from debtors.
Any debts that were left unpaid by the person who has died and tax on income generated by the estate during the administration period can also be settled through this account. Inheritance tax may need to be paid if the total value of the estate is over £350,000, although there are exceptions to this rule. For example, if a husband, wife or civil partner is named as the inheritor of the estate.
4. Arrange the funeral
Another important factor to consider is the cost of the funeral for the person who has died. As the executor of the estate, the responsibility of arranging the funeral may fall on you.
If the person who has passed away had not paid for their funeral in advance, then some of the money in the administration account can be used to pay for this. The average cost of a funeral in England is currently just under £4000. However, this does not include other costs such as catering or flowers. However, funeral costs will vary depending on the type of funeral you choose and your location.
The death of a family member or loved one is an extremely difficult time and sorting out their finances may be the last thing anyone wants to deal with at the time.
However, knowing what is involved and the steps required may make things that little bit easier. In cases where there are complex financial issues, or where it appears there are not enough assets to cover expenses, outstanding taxes, or other liabilities, seeking the help of an experienced solicitor may also be helpful.
How can GloverPriest help?
At GloverPriest, we provide friendly and transparent legal advice. If you would like further advice on a Will or administering an estate, please don’t hesitate to speak to one of our expert lawyers today. Complete our enquiry form.