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Feb 21

Financial management when we lose a loved one

Reading Time: 5 mins

When we lose a loved one or someone close to us, it is extremely difficult emotionally. The last thing you need to worry about is sorting their finances. It can be hard to know where to start, particularly when it comes to navigating a Will.

A Will is a binding legal document which allows people to appoint executors to look after their affairs and execute the wishes of the deceased. Beneficiaries are also appointed. These are the people who you choose to leave something to in your Will.

A Will may include instructions as to what is to be done with your estate. This is everything you own – money, property, assets and other possessions.

Sorting and going through a Will can be one of the most stressful parts of losing a loved one. But do not fear, we have created a guide about financial management after losing a loved one.


Reading a will

seeing the will of a loved one

Reading a Will for the first time can be confusing and sometimes overwhelming. Executors can act without a solicitor; however, it may be wise to get some legal advice if you are unsure on how to proceed.

For example, if the estate is particularly complicated, legal advice is the best route to take to avoid any confusion and ensure compliance with the Will. In particular circumstances, legal advice must be followed.

Such circumstances may be, for example, if the terms of a Will are unclear, money or property was left in a trust fund, part of the deceased’s estate is to go to children under 18 years of age or the person who died has part of their estate abroad. In these situations, contacting a solicitor should be the first step.

Similarly, if you think anyone is likely to dispute the terms of the Will, or you yourself would like to contest it, proceeding with a legal team will help you get the best out of this situation. Any legal fees which are incurred as the result of the occurrences noted above may be paid for out of the estate.



So, you have received the Will of your loved one, read through the terms and have decided to contest part of the document. What now?

Contesting your loved one’s Will may be the last thing you want to do. However, there are reasons recognised by law which means it is necessary to do so.

There are two key reasons as to why you may contest a Will:

The will is invalid

If you believe the deceased did not have the mental capacity to make a Will, the Will may be invalid on this basis. Your loved one may have been suffering from a serious illness, Alzheimer’s or dementia when they created their Will.

In 2019, there were almost 750,000 people in England alone living with dementia. For their Will to be valid, they must still be able to make key decisions for themselves and their illness must not affect this. If you believe this wasn’t the case in regard to your loved one, you may have grounds to contest.

Perhaps you want to challenge the terms of the Will on the basis that you believe it doesn’t reflect the deceased’s true wishes or intentions. In other cases, you may choose to challenge the Will if you were unfairly cut out of it.

The will does not provide reasonable financial provision

You may have been financially dependent on the deceased. Even if you believe the Will itself to be valid, you may have the view that you should have been more greatly provided for under the Will’s terms.

If this is the case, you can make a claim under The Inheritance (Provision for Family and Dependents) Act 1975.

It is important to remember that a basic principle of the English Law surrounding Wills, is that you may leave your estate to whoever you choose. If you don’t like the way your loved one chose to distribute their assets following their death, it is not a legal reason to challenge the Will.


Funeral arrangements and costs

Not only are funerals tough for families but arranging them can be a stressful time. A particular stress that comes with arranging a funeral is the cost. According to financial services company SunLife, as of 2020, a funeral with burial will cost an average of £5,033, whilst a funeral with cremation averages at £3,885.However, this excludes extras such as a headstone or flowers.

This is an added stress during an already difficult time. Therefore, it is important to be aware of how the funeral can be paid for. First and foremost, it is important to understand who is paying for the funeral, as the person who signs the papers at the funeral director enters into a formal contract to pay for the funeral.

Your loved one may have had a pre-paid funeral plan, so some or all of the cost may already be taken care of. If this is not the case, the cost of the funeral may be taken directly from the estate of the deceased. It is important to bear in mind, however, that it may be hard to get the funds needed in time for the funeral. Therefore, if funds cannot be released on time, the family may need to pay and be re-imbursed at a later date.


Death duties and what they mean

Death duties were renamed as the Capital Transfer Tax in 1975, and again to Inheritance Tax in 1986. Inheritance Tax is a tax on the estate of the deceased. This includes their property, monetary savings and possessions.

There is usually no tax to pay if the value of the estate is less than £325,000. There are also exclusions to this tax if everything above the threshold of £325,000 is left to a spouse, civil partner or charity.

If a property is left to the children or grandchildren of the deceased, the threshold will increase to £500,000. Similarly, if you are married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die. This means their threshold can be as much as £1 million.

Whatever the value of an estate, whether it is above the threshold or not, it must be reported to HMRC.

Inheritance Tax Rates

The standard rate for Inheritance Tax currently stands at 40%. This is only charged for the part of the estate that is above the £325,000 threshold. For example, if the estate totals £500,000, tax will only be charged on the £175,000 above the threshold.

Gifts given whilst the deceased was alive may also be taxed after their death. However, depending on when the gift was given, ‘taper relief’ might mean the tax charged on the gift is less than 40%.

Similarly, relief may be offered for different situations, such as Business Relief and Agricultural Relief may be included.



Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.


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