Sorting out finances is often the last thing on your mind when you’re grieving the loss of a loved one.
Unfortunately, however, there’s no escaping the fact there will be some financial admin to tackle, or ‘sadmin’ as it is sometimes known. The length of time this will take will depend on their individual circumstances and how complicated their financial situation was.
For many, sorting out finances may be as straightforward as closing accounts and getting a valuation of assets for inheritance tax purposes. But if the person who has died had more complex financial affairs, then there may be a few extra things that you need to address.
While it’s completely reasonable to sort out things like registering the death and organising the funeral first, it’s important not to neglect their financial affairs for too long. You might find you’re further along the path of sorting these out than you think as you will probably have already done a number of things that will help you on your way, such as getting death certificates, notifying banks and government organisations that the person has died and gathering the financial information required to deal with their estate.
Here, we explain what needs to be done to sort out someone’s finances and some tips for managing the process.
When should you start organising the finances of someone who has died?
When someone passes away, there are some things that need to be done in the first few days and weeks, which you can read about in our article What to do when someone dies, but other activities can usually wait a little while.
Although actively organising the finances of the person who has died is not something that needs to happen straight away, it’s important not to leave it for too long as the longer you leave it, the more complicated it can get.
Some admin tasks before you get started
Before getting started, there are a couple of things you will need to consider and carry out if relevant:
Check who’s in charge
Only an executor of a will or someone who has been granted Letters of Administration are able to organise the money of the person who has died. If the person who has died has left a will this will name their executor or executors, but if they haven’t, then an appropriate person will need to apply for what’s known as a grant of Letters of Administration.
If you haven’t been named as an executor or been granted Letters of Administration, you won’t be able to access the accounts of the person who has died, or make any transactions to settle their estate.
Get more death certificates than you think you'll need
When you register a death, you will be given a death certificate and asked if you would like any additional copies. Many businesses and government departments will need you to give them a death certificate as evidence when you notify them that the person has died, so it’s useful to request a few. Depending on the person’s financial situation, you may need more or less, but usually around twelve should be enough.
How to deal with the finances of someone who has died
The best way to get started dealing with the finances of someone who’s died is to gather as much information as you can from things like paper bank statements, bills, memberships, credit card and loan statements. You may have already done this when notifying organisations that the person has died, but if this is the first time you are looking at any of this, you will need to do a few things:
- Make a list of all businesses, organisations and banks that you think the person who has died had an account with
- Contact the businesses on your list to inform them that the person has died. They will probably want a death certificate as evidence
- Ask them to send you a statement of what is in the account, what is owed or any outstanding balances. If you are asking banks for the amount left in the accounts, you will want to ask for a probate valuation.
Although many businesses now send emails rather than letters, it’s still worth trying to track down any paperwork that might help. Bear in mind that while it might be tempting to use any passwords that the person who has died left behind to access their accounts, unless you have been granted probate, you shouldn’t use these, as you could get into legal trouble.
Once you’ve gathered together as much information as possible, you should have a clearer view of the financial situation of the person who has died. If the person who has died had fairly simple finances, your next steps might be relatively straightforward, but for some people, there may be a few more stages involved, which we cover in the following sections.
Taking over household bills and accounts
If the person who has died was your wife, husband or civil partner, you might have a number of accounts, loans, insurances or bills in joint names, or possibly in their name alone. It’s good to get these transferred to your name as soon as possible so you can take stock of the situation and ensure that any bills that have come in are paid on time.
To get things transferred into your name, you will need to contact the financial organisations and inform them that the person has died (they will usually want to see a death certificate as evidence). They can then advise you on the next steps, whether that’s changing payment details, closing accounts or opening new ones.
It’s worth noting that some organisations have special bereavement services that can help during this process. It’s always worth asking if the organisations you are dealing with provide this type ofservice, as it means you’ll be able to deal with specially trained customer service representatives who can empathise with the stress and grief you might be experiencing and will take the time to work through things with you.
Dealing with debts
If you know that the person who has passed away had debts that they were paying off, these will need to be settled by their estate. All debts must be paid off before any money can be distributed to any beneficiaries. It can be daunting to start organising and paying off debts if you’ve never had them yourself, but there are three main steps you can take to get on top of them:
1. Establish exactly how much is owed
Start by making a list of all the debts you can find, noting how much is owed on each of them and whether the debts are individual or joint, secured or unsecured and if a guarantor is named on any of them. Understanding how each debt is set up will help you to work out how to pay them and what should be paid first.
Individual debt
If the debt was an individual debt, so held only in the name of the person who has died, then this must be paid off by their estate, and not by a surviving spouse, civil partner or relative (unless they provided a personal guarantee). If there isn’t enough money in the estate then the debts will be written off.
Joint debt
If the debt is a joint debt, which is held in the names of two or more people (including the person who has passed away) then usually the outstanding debt will pass to the surviving borrower. So for example, if you had a loan in both of your names of the person who has died, the responsibility to pay it will pass to you.
Secured debt
Things get a little more complicated if the debt was a secured debt, (a debt that uses physical assets, such as property, as collateral), as how the assets are owned will change who is responsible for paying the debt.
Generally, if the asset was owned solely in the name of the person who has died, its value will be added to the estate and will need to be used to pay back the debt. If the asset was jointly owned by two or more people then its value won’t usually be added to the value of the estate.
If the secured debt was secured against a property, how the property was owned will make a difference to whether the property’s value will be added to the estate to pay back debts or not. Usually joint property ownership will be arranged as either tenants in common or joint tenants, each of which changes how a debt should be paid:
Tenants in common: When a property is bought jointly as tenants in common, each party will have outlined the specific share of the property that they own. This will mean that only the share of the property of the person who has died will be taken into account when paying back debts.
Joint tenants: If a property has been bought by joint tenants, both parties own 100% of the property, and if either person dies, ownership automatically passes to the surviving tenant. This means that the value of the property won’t be taken into account when paying back debts.
Unsecured debt
Unsecured debts are a lower priority debt than secured debts, so if the estate runs out of money on more important debts, then the creditor can’t claim this money from you.
Of course there may be some undisclosed debts that you aren’t aware of that will also need to be paid. The best way to find out if there are other debts to be paid is by issuing a death notice in a local newspaper or in The Gazette, which is one of the government’s official journals of records.This gives the person’s creditors time to come forward with any claims. The creditors then have two months and one day to submit a claim.
2. Inform creditors that the person has died
You can then make your way through your list of creditors to inform them that the person has died and ask for a balance statement so you know how much is left to pay. At this point, it’s likely that the creditor will give you some space while you organise the estate and arrange to pay off the debts.
3. Start thinking about how the debts will be paid
Once you know about the debts, you will need to start thinking about how to clear them.
Check for insurance
Before you think about paying anything against any debts, it’s important to check for insurance. The person who has passed away might have taken out an insurance policy on their debt that might pay part or all of the debt in the event of their death. If there is an insurance policy, you should make a claim, but if there isn’t you will need to make arrangements to pay the debt from their estate.
Prioritise payments
It’s important to know that before you pay any debts, you’re legally allowed to cover funeral expenses and estate administration costs, so you shouldn’t be left out of pocket if you have paid for any of these things.
Before you can make payments against debts, you will need to have either probate or grant of administration, which gives you the right to move money around and start settling the finances of the estate. You can find out more about probate in our guide What is probate?
Debts will need to be paid before the estate is distributed to any beneficiaries, and there is a specific order that you will need to pay in:
1. Secured debts should be paid first. These will usually be things such as mortgage repayments
2. Priority debts are next, which might include things such as Income Tax and Council Tax. You can read more about this in our article, What taxes need to be paid when someone dies?
3. Unsecured debts are paid last and will usually include utility bills and credit cards.
If there isn’t enough money in the estate to pay all of the debts, the highest priority ones will need to be paid first and anything that is left to be paid is usually written off and the estate is known as an insolvent estate. It’s really important to pay these debts in the right order, otherwise any incorrect payments could leave you liable for the misdirected money.
What to do if you are struggling with finances after someone dies
If you share finances with the person who has died and your income has fallen as a result, managing with less money can be a real struggle. It might be worth looking at drawing up a new budget if you are able to, and our article Budgeting if your income has reduced has some information on how to do this.
If you had joint debts with the person who has died and are now facing paying them alone, you might already be finding it difficult to stay on top of things. If you’ve found yourself in this situation, it can be a good idea to seek professional advice as soon as possible.
There are plenty of free sources of advice available and many charities and organisations can help you negotiate debt repayment plans with your creditors on your behalf. These include:
- Citizens Advice – 0800 144 8848 (England) 0800 702 2020 (Wales)
- StepChange – 0800 138 1111
- National Debtline – 0808 808 4000
- PayPlan – 0800 280 2816
Whatever happens, don’t suffer in silence, as struggling with debts on top of grieving for a loved one you’ve lost can take a real toll on your mental health. If you’re finding it hard to cope, our article Are money worries affecting your mental health? explains where to go for help if you need someone to talk to.
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