Finances are often a source for panic and stress at the best of times, but this is exacerbated greatly by the passing of a loved one. Whether it’s paying for a funeral, understanding the costs and taxes around inheritance or even just getting the deceased affairs in order.
To help ease this burden, we have created this practical guide to help you through all aspects of managing finances both before and after the funeral.
One of the simplest ways to relieve your loved ones of stress after your passing is to make dealing with your estate as simple as possible well ahead of time.
While it may seem somewhat morbid to be preparing for your own departure, these steps don’t have to be. In fact, they are simple measures that can be carried out decades in advance and should be practiced by people of all ages.
Making a valid will is the first step to making dealing with your estate as simple as possible. In it you should also name your executor. By making a will you are removing the need for any extra applications to be made by your family in order for them to take control of your assets. Dying without a will is known as dying “intestate”, which means that your estate is not intrusted to any one person and therefore is open to debate amongst your family.
Should you not leave a valid will, someone close to you will have to apply for a grant of letters of administration, which will allow them to take control of your estate and distribute it in line with intestacy rules. As a part of these rules, if you fail to leave a will and you have no surviving family members then your estate will pass to the crown instead, leaving HM treasury to deal with the estate.
After your executor has taken control of your estate they will then need to process all of your finances and carry out tasks like paying any outstanding debts, and cancelling any ongoing services. To make this as simple as possible, keep your affairs well organised and easy to find.
Not only will this practice aid anyone trying to understand your accounts, but it will also make keeping track of it easier for you too! The simplest way to achieve this is to have one consolidated filing system, where all important deeds, contracts and agreements are held. Alongside this, keeping the full details of your accounts and their locations will go a long way to ensuring that the task of collating your monetary assets is quick and simple.
One of the biggest, hardest and most stressful tasks that has to be undertaken after your departure is planning and paying for your funeral. Not only is there the financial pressure of suddenly having to organise the proceedings, but also the emotional strain of trying to do it right, while still suffering under a cloud of greif.
Eliminate this strain by arranging a pre-paid funeral plan well ahead of time. Make the big decisions yourself, pay for the service in easy installments and ensure that when the time comes there is one less thing for your family to worry about. Using a pre-paid plan ensures that you have the funeral that you would like and gives you the freedom to enjoy your later years, knowing everything is taken care of.
Until now we have discussed what someone can do before their own time comes, but what about those suddenly finding themsleves in the position of dealing with an estate for the first time? What are the first steps you should take, and what legal requirments are there?
The very first step in dealing with a will is to identify who’s responsibility it is to do so. If a valid will has been made, then the dearly departed will have named their executor well ahead of time. In most cases, the executor is the closest family member, friend or even the heir of the estate. If no executor is named, then anyone can apply for the role (by applying for a grant of letters of administration).
With the who sorted out, we then look at the how. An executor must apply for probate, which is the powers to act on the contents of the will, and take control of the estate. Probate is not required by everyone however. If the estate is held jointly with a surviving spouse, doesn’t contain any land, property or shares or the money held is within a limit laid down by the bank then probate will not be required.
A charge of £215 is applied for each probate application on any estate worth more than £5000.
Applying for Probate can in itself be a daunting task, as there is a lot of information that must be gathered in order to do so. For this reason, the deceased having kept their affairs well organised will prove infinitely helpful to those having to collate them all.
One option that many people choose is to hire a probate specialist, who is a solicitor who can do this work for you, at a cost. They will assist you in collating all the required documents, and finding the value of a deceased person’s estate.
Should you choose to do this yourself you will need to find the value of any assets, gifts, debts and jointly owned assets, along with working out the final value with debts being paid. Find a helpful, more detailed guide to this here.
One of the first taxes you may have to pay even before applying for probate is inheritance tax. If the estate is worth over £325,000 then this tax will apply, and must be paid before probate is granted. In the event that assets of the estate must be sold to afford the tax, a letter of credit can be issued by HMRC.
Once inheritance tax has been paid and probate granted, you must then proceed to clear any outstanding taxes or debts owed by the deceased. To be able to pay some of these debts, you may need to sell property from the estate. This can include selling a house, or other assets that can yield the nessecary funds.
One form of property that is often overlooked and quite complex is a shares portfolio. In the case of a small portfolio, shares can be sold by yourself, but if large it is best to seek professional advice. This is something that a financial advisor can help you with.
With the estate under control, valued and free of debt, it then falls to the executor to distribute what remains in accordance with the wishes of the deceased. This could mean the entirety of the estate being left to one person, spread among many, or even donated entirely to charity. What is important is that these wishes are met, as a will is a legally binding document, and so must be treated with the greatest respect.
