Six steps to spring clean financial affairs for a smooth inheritance and family's peace of mind

The death of a loved one is a difficult time for family members, some of whom may also be the administrators of the estate, which can be a stressful job. Even where a will has been made, and assuming it can be easily located, administrators and family can be faced with the laborious and trying task of collecting and verifying details of the deceased’s assets, accounts and other records that could be crucial for the inheritance tax declaration and winding-up and distribution of the estate.

When a colleague of Evelyn Partners’ Head of Estate Planning Ian Dyall died last year after a long illness, his family found a folder on his desk entitled, ‘Dad’s dead – what next!?’

‘As well as generating a smile from those who appreciated his dry humour,’ says Dyall, ‘it was an exceptionally thoughtful and useful gift to his family. As an ex-financial adviser, the man was very aware of how stressful administering an estate can be, and that he wouldn’t be around to take care of the family’s financial affairs as he had always previously done.’

Dyall adds: ‘The folder contained everything his family would need to make the administration process as simple and stress-free as possible, with contact numbers of people who could help. This is a relatively simple measure that anyone who is concerned about passing on their wealth smoothly to their family, and making it easier for them, can and probably should adopt.’

Here Ian Dyall provides six ideas on what the folder should contain.

Savings, investments, pensions and bank accounts

Not too long ago every investment a person owned had a paper trail. Within 12 months of death at some point a statement would arrive in the post, alerting the executors to the existence of that investment. These days that is not the case.

Most people have moved to electronic statements, which would be inaccessible to their executors, and some investments, such as cryptocurrencies and even now many current and savings accounts, are entirely virtual. The folder should contain an up-to-date list of your accounts, what you own and where it is kept.

If you have a financial adviser, providing a contact number for them can be valuable. Your financial adviser should have a list of all your investments, debts, bank accounts and professional advisers. (In my colleague’s case he referred his family to his friend, who was also a financial adviser and had the latest details of his financial affairs.)

Think about which past employers hold pension schemes which you belong to and ensure that there are contact details. Whilst you are doing this, take the opportunity to ensure that things pass to the people you want smoothly on death.  You should nominate beneficiaries for any pension policies or death in service insurance from past employers.

You should also list any debts that you may have such as credit cards, mortgages, car loans as these will need to be repaid before the estate administration can be finalised.

If you have items that may be difficult to dispose of then you may want to give guidance on how to dispose of them.  For example, I have a collection of guitars which would be difficult to value and sell, so I have a list of their approximate values and contact numbers of people I trust who would be able help when selling them.

Wills, trusts and lasting power of attorney

Include a copy of your latest will plus any letter of wishes, your lasting power of attorney (if you have one) and any trusts that you have created.

Ensure that those trusts will have at least two trustees who are capable of acting following your death.  If they haven’t, then take action now to appoint new trustees. As advisers we frequently see cases where a client is sure that an investment is in trust and not part of their deceased parent’s estate, but the trust deed cannot be found, so it is not possible to prove it.

In some cases, if you are the beneficiary of certain types of trust, they will form part of your estate on death.  Copies of any trusts you are a beneficiary of, or details of the trustees, will be valuable as your executors will need to provide details of those trusts when completing the forms necessary to administer your estate.

Records of gifts

Your executors will also need to know what gifts you made in the seven years before your death and potentially in the seven years before the earliest of those gifts, in other words up to 14 years before death.  That is very difficult for an executor to answer unless you have kept a record of the gifts you have made.

If a gift is made on a regular basis from income (rather than capital) and doesn’t affect your standard of living then it is immediately exempt. That is a very valuable exemption, particularly for those with lots of excess income.  However, to claim it your executors will need to complete a table showing what your net income was in each of those years and what your expenditure was, broken down into expenditure on mortgage, household bills, holidays and so on.  Unless records are kept it is almost impossible for an executor to work out what your expenditure was seven years ago, so it may not be possible to claim the exemption.

Records here are especially vital. The tables that need to be completed are in the form IHT403 which can be found on the internet. The best approach is to make a copy of the tables required and fill out the form as you go so that there is a rolling record of the gifts made.

Suppliers and contacts

Possibly the most stressful part of administering an estate after death is clearing the person’s home and preparing it for sale. It is very difficult to let go of the personal items that remind you of the person you have lost. Whilst that is to some extent unavoidable there are some practical things that you can do. Having a good clear out of the office and organising it so that everything can easily be found can help immensely.

My father asked me to help him sort out his own investments recently and we came across details of investments that had long since been encashed. Fortunately, my father was able to tell me which investments were still current, but trying to do that after his death would be much more difficult. I would have to contact each provider to work out what happened to those investments, and many of those providers have long since been bought by other providers, so their records aren’t always as good as they could be.

Details of all the utility suppliers, internet providers, car and house insurance, bank details etc will make it easier to pay the final bills and stop the utilities.  Be aware that once the bank knows that the account holder has died then the account may be frozen, however many banks will still be prepared to pay the final utility bills, or even release money for the funeral, if they are given proof of the bills.

Paying the inheritance tax bill

Whether mitigating inheritance tax is a priority for you or not, if there is likely to be an IHT liability on your death then it is worth considering how your executors will pay it.

IHT needs to be paid before probate is granted, and probate is required before most companies will release any assets. That is a problem as the executors may not have the funds required to pay the bill. The liability on some illiquid assets, including property, can be paid in up to 10 instalments over 10 years, but many executors are forced to borrow money to pay the inheritance tax bill.

Some assets are accessible prior to probate to pay the bill. National Savings and most banks will pay money directly to HMRC to settle the bill. Also any investments held in trust are controlled by the trustees and are not part of the estate. They too can often also be used to pay the liability. Thinking in advance about which assets would be available and whether they would cover the liability can save a lot of administrative hassle and avoid the cost of borrowing to pay the bill.

The personal stuff

I have focused on practical steps to simplify the estate administration and simplifying the stress of the administration can greatly help to alleviate the emotional pressures of bereavement. But discussing difficult topics such as your death and funeral with your children can be even more beneficial.

My closest colleague lost her father last year. He was 90 and had been ill for some time, so he had the opportunity to discuss these difficult topics with her. Before his death they had discussed what songs he wanted at the funeral, whether he wanted to be buried or cremated and lots of other issues. She said she found it really helpful emotionally as she didn’t need to agonise over those issues when asked by the funeral directors. She knew she was doing exactly what her dad would have wanted.

So even if having these discussions in lifetime can seem too difficult, then leaving written instructions will be hugely welcomed by your family.

ENDS

Disclaimer 
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. 
Issued by the Evelyn Partners group of companies (the 'Group') which comprises Evelyn Partners Group Limited and any subsidiary of Evelyn Partners Group Limited from time to time.  
© Evelyn Partners Group Limited 2024  
  
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We are a wealth management and professional services group, created following the merger of Tilney and Smith & Williamson in 2020. With £61.8 billion of assets under management (as at 31 March 2024) we are one the largest UK wealth managers and are also the seventh largest UK accountancy firm ranked by fee income (source: Accountancy Age 50+50 rankings, 2023). Evelyn Partners was named Accountancy Firm of the Year in the 2023 City AM Business Awards.  
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