How to manage money when someone dies

The days after someone you cared about passes away are often a surreal blur of to-do lists.

Over the blanket of grief lies the tedious, often emotional process of informing the powers that be to start the ball rolling on funerals, taxes and inheritance.

We expect those organisations, and the specialist teams within them trained to help the bereaved, to deal with us intelligently, carefully and empathetically.

At the very least we expect them to deal with us in a transparent, fair and legal way.

But this week, Santander was fined almost £33m for failing to deal appropriately with more than 40,000 bereaved relatives of its recently deceased customers.

Failing to transfer more than £183m to beneficiaries when it should have, some people have had to wait “many years” to receive money they were fully entitled to from the bank.

Nor did the bank reveal the true extent of the problems to the Financial Conduct Authority (FCA) when it should have done.

So how do you deal with the financial affairs of someone who has gone? And what should you expect from the financial institutions involved?

Where to start

Financial affairs come a distant second to the immediate, emotional reality of a loss, but once relatives and friends have been told, the death has been registered and funeral arrangements begun, the financial side of things may need to kick in fast.

On death, all our assets are frozen, including property, pensions, savings, investments and everyday banking. Contrary to wishful thinking, debts aren’t usually written off at the point of death, though there may be insurance policies in place to deal with some or all of these.

With a funeral to pay for at the very least, you’ll need to start working out the full extent of the person’s financial circumstances, including any inheritance tax liabilities, remarkably quickly. None of this is a quick process though.

Consider purchasing about five death certificates (costing between £4 and £10 each) as various financial institutions will ask for one.

If you’re the legal partner of the deceased you may be entitled to financial bereavement support or other allowances to help you deal with what can be very expensive admin, the cost of taking time off work and other circumstances that can quickly mean you’re out of pocket.

Other situations, such as being widowed with young children, can sometimes mean you’re entitled to support. Check your entitlements here.

Probate

Formally dealing with the assets – the estate – of someone who has died in accordance with their wishes is called probate.

So within the first week or two after the death it’s important to make a full list of the person’s assets, debts and policies as well as looking for a will, because if you die without one, and millions of us do, it gets more complicated. Which? provides a guide to probate and dying intestate.

Getting permission to collect up those assets and distribute them to those who are set to benefit from them is called the “grant of probate” or “grant of confirmation” in Scotland.

That means getting in touch with all the financial and government departments the person has had dealings with. And that’s where the cracks and inconsistencies can start to appear.

You should expect all the financial institutions you deal with to immediately send you an up-to-date statement – whether that relates to a debt, an asset or an insurance policy. But while some won’t release any information let alone funds until they have proof of that probate, others will. Limits range from a few thousand pounds to many hundreds of thousands depending on which businesses the executor is dealing with.

And while all the major financial organisations have dedicated bereavement teams, there seems precious little consistency outside of the basic legal obligations set out by the FCA. And sometimes, as we’ve seen this week, not even then.

That’s before you start to deal with tax and benefits.

Confusing and complex

There are schemes in place to try to simplify and smooth the process of unravelling financial affairs.

The Death Notification Scheme is designed as a single point of contacting a number of banks and building societies. But it is a limited list.

There’s a similar set up with government organisations known as Tell us once but it isn’t available in all areas.

Probate is already a long and complex process that regularly leaves those trying to do right by the deceased out of pocket, not least because these executors are liable for any mistakes they make.

Just last month, tax body the Office of Tax Simplification (OTS) warned that banks had to do more to help bereaved families. Its in-depth report found that many executors found dealing with financial services companies difficult and that managing other obligations, particularly inheritance tax (IHT) was a huge burden.

Make it easier

Last year, inheritance tax forms were completed for around half of those who died – about 280,000 people. And yet IHT was payable on fewer than 25,000 estates.

More than a third of those who didn’t employ a professional adviser spent 50 hours on administration.

The report called for a simpler, digital form and easier granting of probate for straightforward estates, as well as better guidance and communication. It suggests an official executor status, to make it easier to access information about the estate.

Life would be easier, it said, if there was a standard process for accessing information or funds from financial firms.

“This report shines a spotlight on the impact of forcing people through a fiendishly complicated process at a really horrible time in their lives. It’s an area crying out for radical simplification,” said Sarah Coles, personal finance analyst, Hargreaves Lansdown.

“It recognises that any long-term solution will be digital and mobile – which could make an enormous difference to executors buried in paperwork and impenetrable manuals. Unfortunately, a fully digital solution isn’t going to see the light of day in a hurry.

“Streamlining the process is incredibly useful, but simplifying the rules as well would be transformative. The OTS doesn’t rule this out – it has promised to address all kinds of things – ranging from gifts to trusts and the residence nil rate band. Unfortunately it’s not in a hurry.

She added: “This will come as no comfort to anyone currently mired in the process. You’re likely to hit your deadline for submitting your forms well before we see any material change.”