Finances after death: what to do after someone dies

When you lose a loved one, their estate, finances, and last will and testament likely won’t be at the top of your list – and that’s okay. 

But when the time does come to deal with the finances of someone you’ve lost, you’ll find there are quite a few boxes to tick. And we’re here to help. 

We’ve compiled a financial checklist to help you know what you need to do regarding their money and property (the deceased person’s estate).

What happens to a person’s assets when they die?

Anything and everything owned by a person before they die is known as their estate, which may include: 

• Money, both cash and money in a bank or building society account – and can include money paid out on a life insurance policy 
• Money owed to the deceased 
• Shares 
• Property 
• Personal possessions, e.g. cars or jewellery 

However, if the person who has died owes money – whether on their mortgage, rent, or a credit card for example – this will come out of their estate. 

The estate of the person who has died is usually passed to surviving relatives and friends, either according to instructions in the will, or if the person dies without leaving a will, according to certain legal rules called the rules of intestacy.

You can also learn more about what partial intestacy is here. 

Executor vs administrator: what’s the difference? 

The person who deals with the estate of someone who has died, handles any taxes or debts, and distributes their money or property is called an executor or an administrator.

But what’s the difference? 

Executor

An executor is the person named in the will to be responsible for dealing with the estate of someone who has died.

However, you may have to apply for probate – a special legal authority – before you can deal with the estate if you are the executor. 

Administrator

An administrator is responsible for dealing with a person’s estate under certain circumstances, if, for example, there is no will or the named executors do not wish to act.

Just as executors may need to apply for probate, an administrator has to apply for letters of administration before they can deal with an estate.  

Tax and benefits

It’s important to sort out the benefits, tax, and national insurance (NI) of someone who has died as soon as possible after their passing.  

Their estate might be owed some tax, or there may be tax to pay, so you’ll need to tell HMRC and any government department that paid benefits to the person who has died about their death as soon as possible.

You may be able to tell several government services using the Tell Us Once Service depending on where the deceased person lived.  

To report the death to the Department for Work and Pensions (DWP), you can telephone the DWP Bereavement Service and they can deal with benefits being paid to the person who died, and check whether the next of kin is entitled to benefits. 

HMRC and GOV.UK can also offer extra advice on tax and benefits in cases of bereavement. 

Debts 

When someone dies you should contact all their creditors – do this by placing a notice in The Gazette, the official public record of legal notices in the UK.

Creditors will then be able to make a claim against the estate to pay off a debt left by someone who has died. 

If you don’t, creditors can come forward after the estate has been settled and you may need to pay off the debt with your own money. 

Check whether the person who died had any insurance policies to pay off their debts, like a payment protection insurance policy taken out at the same time as a loan.

Generally, creditors cannot recover the amount still owed by a deceased from anyone else, including that person’s surviving relatives. Creditors generally cannot claim against the deceased's relatives unless there is a joint debt or the relative is a guarantor. 

In joint debt, like an amount on a credit agreement taken out in joint names, an overdraft on a joint account, or council tax or water bills outstanding in a joint property, the debt can be recovered from the surviving person.   

Probate and letters of administration 

Probate 

As the named executor in someone’s will, you may need to apply for probate, the legal authority to share out the estate of the deceased according to instructions in the will.

You won’t always need probate to handle the estate, and remember, even if you are the named executor in the will, you are entitled not to act as executor if you don’t want to. 

Letters of administration 

If you wish to deal with the estate and you are not named as executor, you will need to apply for letters of administration – making you the administrator.

You need to do this if: 

• There is no will 

• The will is not valid
• There are no executors named in the will
• The executors cannot or are unwilling to act. 

However, there are strict rules about who can be an administrator. If there is a valid will, you can apply if: 

• The person who died left their entire estate to you 
• The executors are not named, or cannot, or are unwilling to act. 

Without a valid will, as the next-of-kin, you can apply to be an administrator in this order of priority: 

1. You are the married partner or civil partner of the person who has died 

2. You are the child of the person who has died 

3. You are the grandchild of the person who has died 

4. You are the parent of the person who has died 

5. You are the brother or sister of the person who has died 

6. You are the nephew or niece of the person who has died 

7. You are another relative of the person who has died. 

An unmarried partner, or same-sex partner who has not registered a civil partnership and who has not been named in a will as an executor isn’t usually able to act as an administrator. 

However, there are some instances in which you do not need letters of administration to deal with the estate. 

Jointly-owned property 

There are two different ways of owning a home jointly: 

• Beneficial joint tenancies 
• Tenancies in common 

If the partners were beneficial joint tenants, the surviving partner automatically inherits the other partner's share of the property.

There is no need for probate or letters of administration unless there are other assets that are not jointly owned.  

However, if the partners are tenants in common, the surviving partner does not automatically inherit the other person's share, meaning probate or letters of administration will be needed and ownership of the property distributed according to the will or the rules of intestacy. 

Inheritance tax 

You must inform HMRC about the death, regardless of whether probate or letters of administration are needed, in case inheritance tax (IHT) is payable. 

If an estate is valued at more than £325,000, IHT may need to be paid, but there are some exceptions to this rule, for example if the husband, wife or civil partner inherits the estate. 

If inheritance tax does need to be paid, some of the tax must be paid before probate or letters of administration are granted.

Once granted, the final tax bill will be provided. See GOV.UK for more info.

Get expert financial advice

If you are the executor or administrator of a loved one’s estate, there are a few essential processes to complete in the event of their passing to ensure their finances are effectively managed and wrapped up.

You may be responsible for handling the tax, benefits, and NI of the deceased, which should be handled as soon as possible after their passing.

Ensure that you report their death to the tax office and the DWP in good time to enable them to handle any potential tax obligations and benefits the deceased may have.

Let Unbiased match you with an expert financial adviser who can provide support on finances after death and assist you in handling your loved one’s financial matters as smoothly as possible during a difficult time.

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