Money: Financial steps after a death

Clifford German on how to avoid further worry when a relative dies
A death in the family brings financial worries at a time when most families are ill equipped to cope with them. But if you make note of a few simple procedures you will avoid the pitfalls and minimise extra anxiety.

First, report the death to the local Registrar of Births, Marriages and Deaths within 48 hours. Banks and building societies must be notified so that the dead person's accounts can be frozen. Joint accounts can still be used by the surviving partner.

If the dead person was receiving a pension, the administrators have to be told. Any money due for the month the pensioner died is usually paid in full. Claim a pension for the surviving spouse at the same time.

The local benefits agency (the new consumer-friendly face of the DSS), whose number is in the local phone book, handles any claims for death benefits, income support, widows' pensions or other allowances. A tax- free grant of pounds 1,000 is available to help widows under 60 with immediate financial needs.

The next task is to obtain probate, which is the High Court's permission to distribute assets to the beneficiaries of the will. Obtaining probate is the task of the executors, who are named in the will, or the administrator (usually a relative who volunteers if there are no appointed executors). Anyone can be an executor or administrator provided they are at least 18 and follow a few simple rules.

The first step is to find the probate office (from the phone book or library) and obtain the appropriate forms. These are an application form, PA1, and either IHT205, if the estate is worth less than pounds 200,000, or IHT44, if it is worth more. IHT37 needs to be completed if the deceased owned property, IHT40 if there were any stocks and shares or unit trusts, and a spouse's contribution form, PA5, if the home was in the sole name of the deceased. A leaflet, PA2, is available to help with filling in the forms.

The executor/administrator must list all the assets of the deceased including the value of all property and belongings. Any money due to the estate and any outstanding debts (including mortgages) should be listed. If the total value of the assets falls well short of the threshold for paying inheritance tax (currently pounds 231,000), this is a relatively simple procedure. The closer you come to the threshold, the more precise the Probate Office expects you to be - so you may need professional help with valuations.

Completed forms plus the death certificate and will should be sent to the Probate Registry, and the executor/administrator then has to arrange an interview with the probate office.

The Inland Revenue must also be informed and any tax due, including inheritance tax, has to be paid before probate is granted. Inheritance tax is not payable on assets left to a surviving spouse, but if assets exceeding pounds 231,000 are left to anyone else, including children, IHT will have to be paid. If the first spouse has already died, all assets have to be included in the estate, including any sizeable gifts made in the last seven years of the deceased's life.

Once probate has been obtained, the assets can be transferred to the beneficiaries of the will. If there is no will, the distribution of assets follows a formula laid down by the courts. This allots all assets up to pounds 125,000 to the spouse (but not an unmarried partner).

If the task of obtaining probate sounds too daunting, banks and solicitors can act as executors and take on all the hassle in return for a fee of up to 3 per cent of the net proceeds of the estate. But they may well take literally their instructions to "call in" the assets of the estate and try to sell up. It is important to lay down precise instructions if assets are to be transferred rather than cashed and sold.

Some individuals give specific instructions in their will that all their assets are to be sold and the proceeds distributed among their heirs. This avoids any wrangling over who gets what.

If there is only one beneficiary it makes sense to transfer assets such as shares and bank and building society accounts directly into his or her name in order to eliminate dealing costs and to maintain the continuity of the investment. It would be a shame to lose a possible future windfall from a building society by allowing an existing account to be closed rather than transferred.

Stocks and shares can be transferred free of charge simply by writing to the registrar. Bank and building society accounts can be transferred by contacting the branch where they are held, and National Savings can be transferred by writing to the Registry at Lytham St Annes.


NP45: a guide to widows' benefits. From benefits agencies and most post offices.

"How to sort out someone's will: a straightforward guide to coping with probate". Which, Freepost, Hertford XG14 1LH.

IR45: income tax, capital gains tax, inheritance tax: what happens when someone dies. IHT3: an introduction to inheritance tax. Both available free from the local tax office.

"Making Your Will": factsheet no7; "Probate: dealing with someone's estate": factsheet no14, both from Age Concern. Call 0800 009966.