What happens to bank accounts after death?

Dealing with the death of a loved one is always going to be hard. Here we explain what happens to their bank accounts and what steps you need to take to get their financial affairs in order.

When someone dies, it is illegal to access their bank accounts unless you are a joint account holder on that particular account.

How to manage the finances of a deceased person

Aside from arranging the funeral, there are a number of steps you need to take before you can deal with the deceased’s financial affairs:

1. Register the death
2. Apply for probate
3. Remember inheritance tax!
4. Contact banks, utility companies and insurers

1. Register the death

When someone dies, you should register the death within five days.

This is the only way to get a death certificate which you must have in order to access bank accounts of the person who died.

2. Apply for probate

If the deceased left a will, they should have named an executor or administrator who will be in charge of handling the estate – that’s property, savings and belongings.

Once the executor has the original copies of the will and the death certificate (no photocopies allowed), they can apply for probate – the legal right to deal with the deceased’s estate.

If someone dies without a will, the application process is the same, but you’ll get ‘letters of administration’ rather than a ‘grant of probate’.

3. Remember inheritance tax

You’ll need to estimate the value of the estate and report your findings to HMRC to determine whether or not inheritance tax (IHT) is owed.

IHT won’t be charged if the inheritance is left to a spouse, civil partner, charity, or amateur sports club – otherwise, IHT will apply on any estates valued at over £325,000.

For the 2019/2020 tax year, the minimum tax-free threshold increases to £475,000 if the estate was left to children or grandchildren, including step and adopted children.

It is usually the estate – not you as the executor and/or inheritor – who pays inheritance tax, which is due six months after the death.

4. Contact banks, utility companies and insurers

Now you have the official will, death certificate and grant of probate (or letters of administration if there was no will), you can inform any banks, building societies, utility companies and insurers of the death.

Current and savings accounts

Bank accounts remain open until all the money is retrieved and the account formally closed. However, direct debits and standing orders will be cancelled.

Remember, it is illegal to withdraw money from an open account of someone who has died (unless you are the other person named on a joint account) before you have informed the bank of the death and been granted probate. This is the case even if you need to access some of the money to pay for the funeral.

As the executor, it is down to you withdraw any money and distribute it to the beneficiaries according to the will. A solicitor will be able to help you with the process.

If someone died without leaving a will, rules of intestacy apply.

There is, of course, the real possibility you do not know the details of all the deceased’s bank accounts or that some details have been lost. In that case, there are online tools that can help you discover lost accounts.

Debts

Debts such as mortgages, loans or credit cards are not passed on to the inheritors, but must be paid off before the remainder of the estate is distributed as per the instructions laid out in the will.

If you are unsure of what or how much money is owed, you’ll need to place a notice in The Gazette – the official public record of deceased estates. If you fail to do this and a creditor later comes forward with a claim against the estate, you might personally be liable for the unidentified debt.

Two months and one day after the notice is published and provided no other creditors have come forward, you can distribute the remaining estate amongst the beneficiaries.

Any debts taken out in a joint name become the sole responsibility of the survivor when one of you dies.

Insurance companies

Any open insurance policies need to be cancelled – remember, unless a claim is made, insurance companies do not pay out, so you will not recoup any payments the deceased made as part of their policies.

However, if they had any kind of life insurance (including mortgage life insurance and PPI) you can make a claim and the policies end.

Pensions

If the deceased was receiving their State Pension before they died, contact the Pension Service to stop the payments.

You may be able to claim their personal or workplace pensions (if they had any), but how much you’re entitled to largely depends on the type of pension they had.

Trusts

If a bank account is held in a lifetime trust, the successor trustee named in the trust document can present the death certificate and a copy of the trust to the bank to take it over.

How to get your affairs in order today

While much of the advice in this article is about how to manage someone else’s finances once they have died, there are several small things you can do for yourself or the person you are caring for now.

Special counsel at Foley & Lardner, Jamil G. Daoud, offers the following tips:

• Get hard copies of bank statements. Online statements have become the norm for current and savings accounts. Try to obtain detailed records by printing off online statements or requesting paper ones.
• Consolidate accounts. This might not be possible if the person has created a complicated web of savings accounts, but if there is a savings account here and a current account there, merging them could simplify matters.
• Add names to individual accounts. Determine exactly how the account is titled while the person is still alive. If you have power of attorney for someone, consider the following steps if your powers allow: Add one or more joint owners to the account; designate one or more payable-on-death beneficiaries for the account; transfer the account to the owner’s revocable trust.
• Pre-plan your funeral, if you can. One of the main reasons people need quick access to a person’s bank account after they have died is to cover the arrangements. Planning ahead alleviates that stress during an emotional time.

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Last updated: 18 April, 2019

How to sell (or buy) a home without an estate agent

With the average highstreet estate agent charging between 1 and 3% of your property price to sell your home, it’s well worth investigating alternative ways to sell your house and save some money.

And if you’re looking to buy, it’s worth knowing about some of these alternative home selling methods too, so you know where to look to find a good deal!

Here’s how to buy or sell a home without using a traditional estate agent:

1. Use an online estate agent
2. Do it (mostly) yourself
3. Ebay and Gumtree
4. Facebook
5. Buy from (or sell to) a friend
6. Go chain-free with an advance
7. Raffles
8. Auctions
9. Offer a freebie

Use an online estate agent

Rightmove and Zoopla provide massive online directories for property sales and lettings. Getting your property listed on one of these sites is a great way to sell – but you can’t upload the listing yourself; only estate agents can do it.

The good news is, you can now find online-only estate agents that provide all the usual services of a traditional highstreet agent – photography, viewings, etc. – but at a lower price point.

Do it (mostly) yourself

An alternative is to use a company like HouseSimple or Emoov who will list your property on the main property websites like Rightmove, Zoopla and PrimeLocation – but you’ll usually have to manage more of the process yourself, such as viewings.

For example, HouseSimple charges £995 upfront, which would save you around £6,500 on the sale of a £500,000 property, for which you get a home visit for valuation and management of the sale through to completion. You can pay extra for managed viewings, mortgage broking, etc.

Purple Bricks offers a fixed fee option for £849 (£1,199 in London) with the option to have accompanied viewings for an extra £300.

Emoov.co.uk charges £795 upfront (£995 for London and inner M25) or £1,495 if you pay on completion of the sale (London £1,995), with no fee charged if the property is not sold.

Ebay and Gumtree

There are currently more than 600 property listings on Gumtree and 1,200 homes listed on eBay. However, many of them are overseas properties and some of them uploaded by estate agencies rather than private sellers.

If you are hoping to sell your house online without an agency, bear in mind that while it’s simple and cheap to upload a few photographs of your home, you’ll also need to arrange viewings and negotiate the price yourself.

Facebook

You could set up a Facebook page for your property but it’s unlikely to reach much of your target audience. However, if you live in a popular area where property sells quickly, you could advertise your home on a local Facebook group which would generate local interest.

Or you could live stream a virtual open day via Periscope…

Buy from (or sell to) a friend

It’s also possible to sell to a friend or private buyer, or from a local builder while they are doing up the house but before it goes on the market.

The advantage of this approach is that you are unlikely to get gazumped by other potential buyers and you can move at a speed that suits you both.

You’ll need to agree a mutually acceptable price, which you might agree on after valuations from a couple of local estate agents.

You’ll need to appoint your own solicitors, as it is not advisable to try to do the legal work and searches yourself. Your mortgage company will want to carry out their own valuation.

Even though you may know the house well, it could be worth organising a survey, as there may be issues that the buyer is unaware of that might affect the condition of the property going forward.

When it goes well, this can be a cost-effective and lower-stress option than normal house buying. It gets tricky if there is something wrong with the property and you want the seller – who might also be your friend – to reduce the price. That’s why it’s better to have the discussion about what to do if a problem comes up in the survey as early as possible, and before you have committed a lot of money in terms of solicitor fees.

Go chain-free with an advance

If you are trying to sell your home but you’re stuck in a chain, then there are companies that will advance you up to 98% of your home’s market value in order to enable you to proceed with your purchase.

It’s not a cheap option, though. For example, Nested will advance you 95% of your home’s value, so you can look around for a new property chain-free. In the background, Nested will try to sell your property like an estate agent. But if you take the advance before your property sells, the fee to Nested is 3.5%; otherwise it’s 2.5%.

It is aimed at people whose onward purchase might fall through if they can’t sell their current home, or who need to sell their home quickly, and as an alternative to a bridging loan.

Raffles

There have been a number of houses which have hit the headlines because they have been offered for sale as a prize in a raffle.

This approach requires caution. Unless you run the raffle in the correct way you could be liable for fines and even imprisonment under the complex rules which govern lotteries and raffles by falling foul of the Gambling Act 2005.

The Gambling Commission points out that many homeowners need to be aware of staying within the law.

You’ll need to pay for proper legal advice and make it clear what happens if you don’t sell enough tickets.

The scheme can work – Melling Manor was sold after former owner Dunston Low sold £2 tickets and raised £900,000 – but other property online raffles have been stopped by local councils and you need to have a fall-back plan if your campaign doesn’t sell enough tickets.

Auctions

Generally speaking, property sold at auction tends to be either in need of a lot of renovation work, difficult to value, hard to get a mortgage for, or very unusual.

If you are buying, it’s a place to pick up a potential bargain, although most auction properties come with some potential issues and so it’s better for experienced buyers or people looking to develop properties for letting. Once the hammer has fallen, you are obliged to buy, whatever state it is in, so do your research properly and in advance.

For sellers, it is an expensive way to put your property into the open market, with commissions likely to be in the 2.5% range. For this reason, it’s not the best option for traditional sales.

Leaflet the locals

If you have your eye on a particular area or street, and you are prepared to do a private sale, then you could put your contact details through the letter boxes of the current owners.

It’s a strategy which works in sought-after streets where houses are snapped up quickly or sold within hours of coming onto the market. Be prepared to have your finances in place, and to use a solicitor to do the conveyancing.

You can also approach local builders who are renovating a house on a street you are interested in. They may be willing to sell before the property is completed to maximise cash flow, although you’ll probably have to pay asking price.

Offer a freebie

If you are really keen to sell, you could sweeten the deal by throwing in extras, such as a car, furniture, or even pets, although this can also put potential buyers off.

More information

Citizens Advice has some further info on how to organise a private sale. Here on Bankrate you can read our complete mortgage guide, learn about stamp duty, and whether you should get a mortgage broker or go direct.

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Last updated: 30 January, 2019

Home Equity Loan Vs. Line of Credit Calculator

Tap into the value you have in your home to get the funds you need.

Everything you need to know about reverse mortgages

While most traditional mortgages let borrowers access funds to purchase a home, one type of mortgage works in the exact opposite way. With a reverse mortgage, the homeowner withdraws a portion of the equity available in a home they already own.

The most popular type of reverse mortgage is the Home Equity Conversion Mortgage (HECM), which is insured by the federal government. HECM products are only offered by FHA-approved lenders, although they are widely available.

Reverse mortgages are only available to consumers ages 62 and older. This loan product is aimed at consumers who own their homes outright — or at least have a considerable amount of equity to draw from.

You may be wondering why anyone would want to borrow against a home they worked hard to pay off. Why not remain in your home and live there debt-free?

According to Steve Irwin, executive vice president of the National Reverse Mortgage Lenders Association (NRMLA), nobody gets up in the morning and thinks about getting a reverse mortgage.

“Instead, they think how they are going to pay for healthcare, fix the roof, pay the property taxes or have enough money to outlive their retirement,” he says. “A reverse mortgage provides solutions to these issues and many others, so that people can live more financially secure lives as they age.”

Who is eligible for a reverse mortgage?

If you’re wondering whether a reverse mortgage might work for your situation, it’s important to understand how you can qualify. We already talked about the age requirement, and the fact that you must be age 62 or older to apply. However, Irwin says that if one spouse is under 62, you may still be able to get a reverse mortgage if you meet other eligibility criteria. For example:

• You must own your home outright or have a single primary lean you hope to borrow against.
• Any existing mortgage you have must be paid off using the proceeds from your reverse mortgage.
• You must live in the home as your primary residence.
• You must remain current on property taxes, homeowner’s insurance and other mandatory obligations such as homeowners association dues.
• You must maintain your property and keep it in good working condition.
• Your home must be a single-family home, a multi-unit property with up to four units, a manufactured home built after June 1976, a condominium, or a townhouse. Irwin says co-ops do not qualify.

How does a reverse mortgage work?

Before you sign on the dotted line for a reverse mortgage, it’s crucial to know how they work and what to expect. For starters, keep in mind that you may not be able to borrow the full value of your home — even if it’s paid off. The amount you can withdraw varies based on the age of the youngest borrower or eligible non-borrowing spouse, prevailing interest rates and the lesser of the appraised value of your home, the HECM FHA mortgage limit ($726,525 in 2019), or the sales price.

Not only does the amount you can borrow vary, but so do your options for how to accept your funds. If you choose a HECM with a fixed interest rate, you will receive a single disbursement lump sum payment. If you opt for a reverse mortgage with a variable rate, on the other hand, you can choose to accept:

• Equal monthly payments provided at least one borrower lives in the property as their primary residence
• Equal monthly payments for a fixed period of months agreed on ahead of time
• A line of credit that can be accessed until it is exhausted
• A combination of a line of credit and fixed monthly payments for as long as you live in the home
• A combination of a line of credit plus fixed monthly payments for a set length of time

The money you borrow via a reverse mortgage doesn’t need to be repaid until the borrower dies, moves out, or leaves the home for any reason. Further, the borrower will never owe more than the home is worth regardless of how much they borrow or what happens to their property values over time. And if the balance is less than your home’s value at the time of repayment, you or your heirs keep the difference.

Reverse mortgages — what are the pros and cons?

Borrowing against your home equity to free up cash for living expenses can seem like a good deal once you retire, but there are advantages and disadvantages with this type of loan. Here are the main details to keep in mind:

Pros

• Borrower does not need to make monthly payments toward their loan balance
• Proceeds can be used for living expenses, debt repayment, healthcare expenses, and more
• Funds can help borrowers enjoy their retirement
• Non-borrowing spouses not listed on the mortgage can remain in the home after the borrower dies

Cons

• Borrower must maintain the house and pay property taxes and homeowners insurance
• A reverse mortgage forces you to borrow against the equity in your home, which could be a key source of wealth
• Fees and other closing costs can be high

How much does a reverse mortgage cost?

Speaking of higher costs, it’s important to understand that closing costs for reverse mortgages tend to be significant. Most HECM mortgages let you finance closing costs into the new loan, however, meaning you won’t have to fork over the money out-of-pocket.

Here’s a breakdown of HECM fees and charges, according to HUD:

Mortgage Insurance Premium (MIP). You’ll pay a 2 percent initial MIP at closing, as well as an annual MIP equal to 0.5 percent of the outstanding loan balance. MIP can be financed into the loan.

Origination fee. Lenders charge the greater of $2,500 or 2 percent of the first $200,000 of your home’s value to process your HECM loan, plus 1 percent of the amount over $200,000. The FHA caps HECM origination fees at $6,000.

Servicing fee. Lenders can charge a monthly fee to maintain and monitor your HECM for the life of the loan. Monthly servicing fees cannot exceed $30 for loans with a fixed rate or an annually adjusting rate, or $35 if the interest rate adjusts monthly.

Third-party charges. Third parties charge their own fees for closing costs, such as the appraisal, title search and insurance, inspections, recording fees and mortgage taxes.

Also keep in mind that the interest rate for reverse mortgages tends to be higher than that of a traditional home loan. Of course, rates can vary depending on your lender, your home value, your creditworthiness, and other factors.

Reverse mortgages vs. home equity loans

If you’re not yet 62 or older but still want to tap into your home equity, you may want to consider a home equity loan or home equity line of credit (HELOC) instead. Both loan products will let you borrow against the equity you have in your home, although you can typically only borrow up to 85 percent of your home’s value including your original mortgage if you have one.

However, it’s important to understand the differences you’ll find with a home equity product.

“The main difference between a reverse mortgage, a home equity loan, and a HELOC is that the homeowner doesn’t need to make monthly payments with a reverse mortgage,” said Irwin. Plus, any funds borrowed from the reverse mortgage don’t need to be repaid until the borrower passes away or permanently vacates the property.

With a home equity loan or HELOC, the borrower does have to make monthly payments until the loan is paid off. Home equity loans can also be more difficult — or impossible — for retirees to qualify for since lenders expect you to have an income to repay your loan.

On the flip side, home equity loans and HELOCs don’t require you to be at least 62 years old to apply. Fees and interest rates for both can also be significantly lower than what you’ll qualify find with a reverse mortgage.

The bottom line

Nobody wants to have to borrow money just to get by, but reverse mortgages do serve an important purpose. For the most part, they are intended to help consumers cover living expenses without having to move in old age. For those struggling to pay for healthcare, food or experiences as they enjoy their golden years, a reverse mortgage can be a game-changer.

Then again, they’re not for everyone. A reverse mortgage isn’t a good option if you can’t keep up with the costs associated with the home, even without a monthly mortgage payment.

If you die or the home is no longer the primary residence for more than 12 months, the loan comes due, which means either you or your estate has to repay the loan or put the home up for sale to settle it.

Another potential drawback: if the loan balance exceeds the home’s value, you or your heirs may need to sign a deed-in-lieu of foreclosure and give the house to the lender.

Homeowners interested in taking out a HECM must also receive mandatory counseling with an independent agency approved by the U.S. Department of Housing and Urban Development. Typically, counseling is free or available at a reduced cost.

To locate a FHA-approved lender or HUD-approved counseling agency, you can visit HUD’s online locator or call the department’s Housing Counseling Line at (800) 569-4287.

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