Bereavement and planning ahead

Following the death of a client, there are set procedures in place for dealing with their investments and these are summarised below. Our aim is to make the process as smooth as possible as we appreciate this will be a very difficult time for the family and others connected to the deceased.
 

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• The steps to take following the death of a client
• Lump Sum and Death Benefit Allowance (LSDBA)
• Useful forms and downloads
• Frequently asked questions

The individuals responsible for the handling of the estate need to take certain steps when dealing with a deceased client’s investments. These are summarised briefly below and more comprehensively within our Guide for Executors and Administrators. This guide may also provide useful information to advisers dealing with the death of a client.

Guide for Executors and Administrators

Step 1 – let us know

The first thing to do is to let us know that the client has died. We’ll also need the death certificate – we accept certified death certificates for both single and joint accounts.

We’ll then put a hold on the account, stop any dealing and reinvest any income generated by the investments. We’ll also stop any adviser ongoing fees, regular savings or withdrawal plan transactions and produce a valuation of the client’s account as at the date of death.

Step 2 – Probate

The executor or administrator will need to obtain probate – they will need to send us a sealed or certified copy of the grant of representation signed by each of the executors. This shows us they are authorised to deal with the estate.

There are instances where we can release money from the estate if probate is not being applied for (please refer to the question below for more details).

Step 3 – Distribute the assets

This is the point when beneficiaries decide whether they’d like us to invest the money into a new account, transfer the investments into a new name, or sell the investments to cash and send them the money.

This allowance limits the value of the lump sum pension savings that can be left for a client’s beneficiaries tax free, if they die before the age of 75. The standard LSDBA is £1,073,100. Some people might have a higher allowance if they also had a higher protected lifetime allowance, or tax-free cash protections. If your client has taken any tax-free cash from their pension while they were alive (including a serious ill health lump sum) then their allowance will be reduced by the same amount. If the pension savings they leave are more than their LSDBA, their beneficiaries will have to pay tax on the extra amount, at their marginal rate of income tax.

If your client dies before the age of 75, their pension can generally be paid out as a tax-free lump sum to their beneficiaries subject to the lump sum and death benefit allowance (LSDBA). If their beneficiaries take their pension as drawdown or as an annuity, then the LSDBA doesn't apply and payments will be tax-free if paid within 2 years of notification of death.

After 2 years of notification of death or if your client dies after age 75, their beneficiaries have the same options, but they’ll have to pay income tax on the benefits and the LSDBA won’t apply.