The Other Side Of Finance — What Happens To My Money When I Die?
Wondering what happens to your money after you pass away doesn’t have to be a morbid preoccupation — it’s just common-sense planning that provides peace of mind.
But over half of UK adults don’t have a will — and if you’re in this situation, your assets may not be shared according to your wishes.
So if you’re feeling perplexed about, pensions, wills or life insurance, don’t worry — our article explains what happens to your money when you die and the next steps you should take today.
Assets
In simple terms, your assets are divided into the following two pots:
- your estate, which includes assets such as your house, cash savings, and investments
- instruments that fall outside your estate, such as most pensions, or life insurance held in Trust.
When you pass away, here’s what usually happens to each:
- Estate — any joint assets you hold automatically pass to the joint holder — such as a house owned jointly with a spouse (this is not the case for property held as tenants-in-common), while other assets are distributed according to what you specify in your will, or by specific rules if you do not have a will in place.
- Pensions — the majority of pension policies not yet paying an income have some kind of death benefit payable, so you should provide a nomination to your pension provider. Many pensions in payment also include a death benefit and you should make sure that you have contacted the scheme to check what is payable and that they have noted your views as to who should receive any benefits.
Because most pensions don’t form part of your estate, they usually aren’t subject to inheritance tax — so they can be a tax-efficient way to leave money to loved ones.
- Life insurance — like pensions, life insurance usually doesn’t form part of your estate. Many insurance policies are written in Trust which means Inheritance tax is not usually applied. It is important to check whether your policies are written in Trust, as if they are not they may form part of your estate and be subject to Inheritance Tax.
But beyond these basic principles, the rules become more complex — it’s best to refer to the government inheritance tax guidance and seek advice from a specialist solicitor.
Making a will
Making a will is important for everyone, but if you want to make sure that your assets are passed on to them appropriately, it’s vital.
- The executors of your will can be anyone, however usually they are close friends or a solicitor, and they’ll ensure that your wishes are carried out precisely. Your will can also include details of your desired funeral arrangements.
- It’s hugely important that you include provisions for children under 18 — provided you have prior permission, you can appoint legal guardians who’ll assume care of your children, and make arrangements for money to be held in trust until they reach a certain age.
Understandably, most parents find it challenging to think about guardianship — but it’s probably the most important consideration of all.
- If you don’t make a will, your assets are divided according to a statutory process called intestacy.
‘Dying intestate’ means you’ve no choice about who benefits from your assets — this intestacy calculator allows you to work through the process.
Next steps
- First and foremost, make a will.
- Check your pensions and life insurance information carefully and inform providers if your beneficiary nominations are not up to date.
- Talk to a solicitor or qualified financial advisor about the best ways to navigate inheritance tax.
Making provisions for what happens to your money after you die is a positive move — when you’re confident that the fruits of your hard work will benefit those you love most, you can live life to the full.
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