You may be aware of the importance of creating a will and choosing executors but do you know what happens to your loved one’s finances when they die? We thought it would be useful to make a note of the most important things that you should consider.
All of our information relates to Scottish rules and guidelines.
How to get a death certificate
In Scotland you have 8 days to register a death. You will need to contact the Registrar of Births, Deaths and Marriages with; a medical certificate with the cause of death; the full name of the deceased; their date and place of birth; their last address; their occupation and the full name, date of birth and occupation of their spouse or civil partner (living or late). Registering the death is free but there is a charge of £12 for the certificate and it may be worthwhile getting more than one copy at this time as the cost may rise.
Locate the will if there is one
It is important to write a will so that your estate can be distributed according to your wishes. Although it may be difficult, consider it a kindness to those left behind as it can remove a lot of stress. For tips on how to write a will, take a look at our blog post here.
When your loved one passes away, locate the will and inform the executors of their role as soon as you can.
What if there is no will?
If there is no will, the deceased will be declared to have died intestate. This means that intestancy law will decide who should inherit their estate. This might mean a very different outcome than you would want. For more information, click here.
Set up an executor bank account
An executor bank account is a special bank account in which the executors can hold funds from the estate. This allows the executors to collect the value of the estate in one place before distributing it to the beneficiaries. It is not a legal requirement but can make the estate easier to manage as it keeps the executor’s personal finances separate from the estate. You can set up an executor account at high street banks such as HSBC, Barclay’s and NatWest UK.
What can the deceased’s financial advisor do to help?
Although the deceased was a client of their financial advisor, this doesn’t automatically make their executors clients of the firm. But, at a difficult time, an advisor is likely to do all they can to assist you in dealing with the deceased’s finances. An advisor can help you find out where your loved one had invested their money and help put you in touch with the correct financial institutions so that their requirements are met. You would want to be clear on what to do for any joint arrangements.
Who will you need to send the death certificate to?
You will need to send the death certificate to every financial institution that the deceased invested money with. Most of these companies will require the original certificate and will not accept copies or digital versions. Many companies will take a number of weeks to return the document to you. Make sure that you take this into account when planning who you are going to contact and when.
How to deal with inheritance tax?
We can’t cover everything about inheritance tax in this post, it’s a topic that warrants its own, separate post. But some of the most important things to know are that inheritance tax is the tax that is due on the estate of someone who has died. The standard rate of tax is 40% and it’s only charged if the estate exceeds the 'nil rate' band tax free threshold which currently sits at £325,000.
There will normally be no tax to pay if the estate is below the threshold, or everything above the threshold has been left to a spouse or civil partner or another exempt beneficiary such as a charity or a community amateur sports club.
If you give away your home to your children (including adopted, foster or stepchildren) or grandchildren your threshold can increase up to £500,000.
If you’re married or in a civil partnership and your taxable estate is worth less than your threshold, any unused amount can be added to your partner’s threshold when you die. This could potentially double up on the tax free threshold for a couple because of the exemption on assets transferred between couples.
There is also a tax incentive to give to charities. The estate can pay reduced tax rate of 36% if you leave 10% or more of the ‘net value’ of the assets to charity in your will. (The net value is the estate’s total taxable value minus any debts.)
If you have any questions regarding anything we have covered in this blog post, please feel free to get in touch. And be aware that if you find yourself in the role of executor for one of our clients, we will do all that we can to make the necessary processes as easy as we can at this difficult time.
It is important to take professional advice before making any decision relating to your personal finances. Information within this article does not provide individual tailored investment advice and is for guidance only. We cannot assume legal liability for any errors or omissions it might contain. Ethical Futures llp is authorised and regulated by the Financial Conduct Authority.