This article looks at what happens to a bank account when someone dies in the UK. Find out how to deal with the property of a person who has died.
What happens to a bank account when someone dies?
No matter who you are or what situation you find yourself in, dealing with the death of a close loved one is always going to be extremely difficult. In this guide, we are going to break down what happens to a person's bank account and their finances when they die.
We will also describe the steps that you need to take in order to get all your financial affairs in order.
How to deal with the property of a person who has died
The estate of a person that has died is essentially everything that person owned. The estate can be made up of the following items:
- Money. This can mean both cash and money held within a bank or a building society account. This will usually include money that is paid out through a life insurance policy
- Money that is owed to the recently deceased person
- Any shares owned
- Property, for example, the deceased's home
- Any personal possessions, such as any car or jewellery
If the person who has died owes money to any other people, this can mean on a credit card, for rent, for a mortgage, or for fuel, then this will come out of the estate.The estate of the recently deceased person is commonly passed down to the surviving relatives and friends.
This can be done according to any instructions described in the will, or if the person who has died did not leave a will, then the estate will be handled according to specific legal rules known as the rules of intestacy. The person who deals with the estate of the person that has died is known as either an executor or an administrator.
An executor is someone who is specifically named within the will as being responsible for dealing with the deceased's estate. In some cases, an executor might have to apply for some kind of special legal authority before they can start dealing with the estate. This is known as probate.An administrator is a person who is responsible for dealing with a deceased's estate under some certain circumstances.
One example of this is if there is no will left behind by the deceased, or if the will's named executors are not willing to act. An administrator must apply for what is known as letters of administration before they can deal with an estate. Although there are some exceptions in certain cases, it is against the law for a person to start sharing out the estate or to take money out of the estate until you have letters of administration or probate.
Managing The Finances Of A Deceased Person
Apart from the arranging of a funeral, there are some important steps that need to be taken before you can legally deal with the deceased's financial affairs:
Register the deceased's death
Apply for probate
Must contact insurers, utility companies, and banks
Inheritance tax must be remembered
Register the death
When a person dies, the first important step is to register their death. This needs to be done within five days if you live within England, Wales, or Northern Ireland. The death must be registered within eight days if you live within Scotland.
Registering the death is the only way to receive a death certificate. This is necessary before you can access any of the bank accounts of the person who has died.
Applying for Probate
If the deceased has left a will, then they should have named an administrator or an executor who will be in charge of handling their entire estate. That means their savings, belongings, and properties. Once the executor has received the original copies of the will, as well as the death certificate, they can then apply for probate.
There are no photocopies allowed, probate will only be given with original copies. If somebody dies without creating a will, the application process is essentially the same, the difference is that you will receive letters of administration rather than a grant of probate.
What is probate?
Probate is the whole process for legally dealing with a dead person's estate.
If the deceased's estate was owned in conjunction with another individual, such as a civil partner or spouse, then probate may not necessarily be required.
Contact banks, utility companies and insurers
Once you have access to the official will, the death certificate, and the grant of probate (or the letters of administration if there was no will), you can inform any insurers, banks, building societies, and utility companies of the recent death.
Closing a bank account after a person has died
Notifying the bank is the first step that needs to be taken. The deceased's bank account will then be frozen, and any payments that were coming in and out of the account, such as standing orders and direct debits, will be completely stopped.
At this point, the bank will let you know about any of the next steps you will need to take, in all likelihood that you will be asked for two different forms of identification, such as your driving license, your passport, or a proof of address. You will need a copy of the death certificate and the deceased's will. This is done so that the bank can formally begin the process of releasing funds and closing the bank account.
Taking Money Out Of A Deceased's Bank Account
It is important to remember that the majority of banks will not allow you to take out money from an open account of a person who has died unless you are the other person with their name on a joint account before you have been granted probate or have a letter of administration.
The majority of banks may release money without a grant, although this is commonly capped at somewhere around the £15,000 and £50,000 mark, depending on the specific bank.
If you are waiting for a grant of probate, then the bank, in some scenarios, will allow you to access money in the account in order to pay for any expenses that relate to the death.
This can include a funeral or probate fees. As the executor of the will, you are responsible for withdrawing any money from the account and distributing it to the various beneficiaries according to the will.
A solicitor should be able to help you out with any issues during this process. If someone has died without leaving a will behind, then the rules of intestacy apply.
How to find lost bank accounts of the deceased
Unfortunately, there is a very real possibility that you will not know all of the details of the deceased's bank accounts or that some of the account details may have been lost. In the case of this, there are online tools that can be used in order to help you find lost accounts.
Debts
Debts, for example, mortgages, loans or credit cards, are not passed on to inheritors, but they absolutely must be paid off before the rest of the estate is distributed as per the instructions described within the deceased's will. This is providing that there are enough assets to repay all the debits. If there are not, then all or some of the debts will be written off.
Once the debts have been repaid, if there is estate left to be shared out, you will need to place a notice in The Gazette. This is the official public record of all deceased estates. If you completely fail to do this, then a creditor later comes forward with a claim against the estate; you may personally be liable for the unidentified debt.
Once two months and one day have passed after the notice was published, and provided no other creditors have come forward, the remaining estate can be distributed amongst the beneficiaries.If any debts were taken out in a joint name, then they become the sole responsibility of the survivor when the other person has died.
Insurance companies
If the deceased had any open insurance policies, then they need to be cancelled as soon as possible. You should remember that unless a claim has been made, insurance companies do not pay out, so you will not recoup any of the payments that the deceased made as part of their policies. However, if the deceased had any kind of life insurance, this includes mortgage life insurance and PPI, then you can make a claim.
Pensions
If the deceased were receiving their state pension before they passed away, then you need to contact the Pension Service in order to stop the payments. You may still be able to claim their personal or workplace pensions, but how much you are entitled to depends largely on the specific type of pension they had.
Trusts
If a bank account is held in a lifetime trust, then the successor trustee that is named within the trust document can submit the death certificate and a copy of the trust to the bank in order to take it over.
Remember inheritance tax
As a fourth and final step, you will need to estimate the total value of the deceased's estate and report the findings to HMRC. This is done in order to determine whether or not an inheritance tax, also known as IHT, is owed.
IHT will not be charged if the inheritance was left to a spouse, civil partner, charity, or amateur sports club. Otherwise, IHT will only apply to any estates that are valued at over £325,000.
For the tax year of 2020/2021, the minimum tax-free threshold was increased to £500,000 if the estate was left to children or grandchildren. This includes step and adopted children. In most cases, it is the estate, and not you as the inheritor or executor, who pays inheritance tax. The tax is due six months after the death.
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