Dying Matters – financial planning
This week is Dying Matters Awareness Week, which highlights the importance of talking about dying, death and bereavement. This year’s theme is ‘Are we Ready’ – so far we have covering planning for the future and sorting out your paperwork. In this article, we cover the financial side and what you can do to prepare.
What happens to my money when I die?
Ordinarily, most assets are frozen on death and cannot be accessed until a Grant of Probate is lodged with the asset holder or financial institution. This includes banks and building societies.
This can lead to a ‘chicken and egg’ situation where the executors need to access funds to settle certain liabilities before they can apply for a Grant of Probate, but cannot do so because they are frozen until the grant is obtained.
There are however some exceptions to accessing funds held in a bank or building society account whilst it is frozen.
Your executors can ask a bank or building society to settle the following liabilities directly:
- The funeral bill;
- The new increased probate fees (when they come in); and
- Inheritance tax payable to HMRC.
Ensure there are cash funds if possible
It may then be sensible to ensure that before you die, there are sufficient liquid cash funds held in your accounts that the executors can draw on following your death. The funeral bill and probate fees will ordinarily together amount to somewhere between £10,000 to £15,000. For higher value estates or a more extravagant funeral, budget on £15,000 to £20,000!
Inheritance tax is more complicated. If your estate is liable to inheritance tax, it may be worth obtaining professional advice as to the amount potentially payable and when so that you can create this additional ‘reserve’ to pay HMRC when the time comes.
If you have stocks and shares managed by a stockbroker or other investment provider, it may be worth asking them whether they are prepared to sell investments under their management before a grant of probate has been issued and to use these funds to pay HMRC directly.
Having and maintaining this ‘reserve’ to pay these liabilities will ensure your executors are spared the trouble and expense of funding the liabilities personally.
Need further advice?
We can assist you with all aspects of planning for the future, including savings advice to forward-thinking tax planning. Our team of chartered tax advisors, technicians and solicitors will spend time getting to know you so that they completely understand your personal circumstances and priorities.