What happens to your assets when you die? And how does probate work?

It’s difficult enough dealing with the death of a loved one. But amongst your grief, you need to process their estate. In this article we explain what happens to your assets when you die.

When a loved one does, their assets are frozen and cannot be sold or transferred until the probate process (the administration of their estate) has been completed.

However, there are some exceptions. For example, banks will agree to transfer joint accounts to a surviving spouse. Investments below a given amount (normally around £10,000) can be transferred without getting a grant of probate. Details differ from bank to bank, building society to building society.

If there are assets that cannot be transferred (eg a house, farm land, shares and other investments) then you will need a grant of probate (if there is a will), or grant of letters of administration (if there is no will).

You need to find out how much the estate is worth

The executors named in the will, or main beneficiaries if there is no will, have the job of finding out exactly how much the individual was worth on the day they died. They must then declare to HMRC and swear an oath to confirm this.

If the estate is more than the individual’s nil rate band (at least £325,000 per individual, potentially £1m per couple from 2020) then they must pay inheritance tax at 40% on the excess.

This can be a lot of money. However, there is no inheritance tax on legacies between spouses. (The government knows it will get their claws on the money after the second spouse dies!)

If the tax is not paid within six months of the date of death interest and penalties must be paid. You can opt to pay by instalments on a property that is not sold, but the first instalment must be paid within six months. Even though you may be grieving,prompt action is essential.

There’s no need for probate after the first spouse dies

When the first spouse dies, it is often assumed that there is no need to get a grant of probate; the joint accounts are transferred to the survivor’s name, and they can stay in the house.

It is only after the second death that it can become clear that there were assets in the name of the first spouse to die, or a trust was set up in their will, but never properly activated.

This can make it harder to administer the estate of the second spouse to die. So it’s worth taking advice. It is harder to put things straight many years later, when memories will have faded., and documents may have gone missing.

What happens if probate isn’t needed

If probate is not needed then the survivor should:

  • Register the death certificate with the banks.
  • Open an executors bank account to receive any assets that were not in joint names.
  • Complete the forms to close/sell accounts and investments.
  • Pay the proceeds to the beneficiaries in accordance with the Will or the intestacy rules.

You can read useful guidance on the intestacy rules here.

What happens if you do need probate

If you do need to get a Grant of Probate of Letters of Administration, you can do this yourself. Again, there is useful advice here.

The case for using a solicitor, however, is that it is a lot of fiddly unfamiliar work, often complex tax rules and sometimes tricky family dynamics to steer through.

Having an independent professional may save you tax, will certainly save you time and can help to keep family relationships intact by introducing a sometimes much-needed dose of objectivity and independence.

Judith Derbyshire is a solicitor at the Somerset-based firm Purely Probate. You can call her on 01458 850146 if you wish you to discuss making your will.