The period immediately after the death of a loved one is not the time anyone would choose to deal with complex financial issues. Unfortunately, however, sorting out the deceased’s financial affairs is an essential task. We explain the basics.
Step 1: Find the will, if there is one
A will sets out what the deceased wants to happen to their money and possessions after they die, so finding their will is always the first step. If you do not know where it is kept and cannot find it in the deceased’s home, it may be with their bank or solicitor for safe keeping, so contact them to find out.
Remember that wills do not necessarily look like legal documents – so don’t throw away anything with any kind of instructions written on it as it may constitute a legal will.
If no will can be found, the deceased will be deemed to have died ‘intestate’, and their estate must be dealt with under the rules of intestacy.
Step 2: Make sure the will is valid and identify the ‘executors’
A last will and testament must be drawn up and signed in line with strict legal rules. Before going any further, it may be worth seeking legal advice.
A valid will always names the people that the deceased wanted to carry out their wishes after their death. These executors are essentially responsible for sorting out the deceased’s financial affairs and distributing their estate in line with the instructions in their will.
Step 3: Apply for a ‘grant of probate’
A grant of probate is a legal document you, as an executor, must have before you are allowed to sort out the deceased’s affairs. If more than one executor is named you can either apply jointly (up to four people) or agree on one person to take on the role.
It is common to ask a solicitor to help with a grant of probate application. If you plan to take this route:
- Use a reputable solicitor.
Either one you already know, or one listed on the law society's website.
- Check how much the service will cost.
Remember that, if the estate is worth more than £5,000, the grant of probate itself will cost £90
It is also possible to apply for probate without the help of a solicitor.
Step 4: Assess the deceased’s estate
As an executor you will have certain duties and responsibilities when dealing with the person’s estate. It is usually advisable to ask a solicitor to help with these duties – the first one being to assess the state of the deceased’s financial affairs.
You will need to look carefully through the person’s personal papers to find details of all their assets (such as bank accounts, building society accounts, insurance policies, share certificates, savings certificates, premium bonds and so on) and debts (such as money they owe for electricity, gas, water, phone bills and so on, as well as personal debt such as credit cards).
In essence, the value of an estate is the total value of the deceased’s assets, minus their liabilities. For more information on valuing an estate, visit HMRC's website.
Step 5: Pay Inheritance Tax if due
If the estate is worth more than £350,000, inheritance tax will be due. This must be paid before the remainder of the estate can be distributed to the beneficiaries of the will – and you may need to pay a portion of the inheritance tax bill before probate is finally granted. Again, if the estate is liable for inheritance tax it is a good idea to get professional legal advice.
Step 6: Make sure you pay any debts
Once you have a grant of probate, you should pay any debts, including funeral expenses, out of the deceased’s estate. If you do not know who they owed money to you should advertise for any creditors to come forward and make a claim against the estate. This advert is called a ‘Deceased estates notice’ and should be published in The London Gazette.
Remember you need to give creditors two months to make a claim. If you do not advertise, you may have to pay any claims creditors make after the person’s estate has been shared out.
It may be necessary to sell property or assets on behalf of the deceased in order to clear their debts. In these cases, it is advisable to get professional legal advice.
Step 7: Distribute the estate
After the deceased’s debts have been paid off, as executor, you are responsible for distributing the estate in line with the instructions set out in their will. In other words, you must ensure that the money and property left over are distributed to the people named in the will.
By law, you have one year to distribute the estate, following the death. If you have not done so by date, you may be liable to pay interest on the estate.
