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  1. Wealth
July 1, 2020

Why banks are being warned about changes to the bereavement process

By Spear's

As the probate process is increasingly moving online, it should speed up the time in which probate is granted, writes Dominic Condé-Cole

It may not be headline news, but banks are being warned about what seems to be an increasingly liberal attitude to releasing funds from a deceased person’s account to their ‘relatives; without a grant of probate.

This trend has seen upper limits move from £10,000 to over £100,000 in some cases.  Recently a number of financial institutions have reviewed their bereavement processes due to the Covid-19 restrictions such that the usual gold standard of a face-to-face meeting with the bereaved relatives is no longer required, particularly since it was not possible for a number of months.

This is probably something that most people have never really considered – the bereavement policy of a financial institution is most likely very far down on a new customer’s due diligence list. Perhaps even the quality of the free pens would rank higher on some people’s lists.

These changes to the bereavement processes may increase the likelihood that cash is distributed to the wrong people either by mistake or through an act of abuse or fraud.  Further, if funds have been removed from an account and the executors are not aware of that account then it will not be factored into the inheritance tax calculation and the estate may underreport and underpay tax and later be hit with penalties.

However, this facility is important because of the Catch-22 nature of the process. The inheritance tax account and payment must be delivered before an application is made for probate – the legal process by which a will is proved. This means that access to funds which can be released without a grant of probate can be extremely helpful in the administration of an estate. Although most financial institutions are willing to release funds directly to HMRC to pay inheritance tax prior to the application for grant being made, each financial institution will have a limit on the amount of funds they are willing to release to a deceased’s relatives.

For estates which require cash for ongoing expenses this can prove problematic but there has been a trend in recent years where financial institutions have steadily increased the amounts they will release before probate is granted.

Probate lawyers, like our accountant colleagues (and frequently best friends) have always needed to be fairly quick at maths, or at least somewhat quick at producing accounts.  This is because an inheritance tax account, if required, must be submitted to HMRC by the end of the sixth month after a person died.

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At the time the account is sent, if tax is due the tax must also be paid, either in full, or at least the first instalment must be made where the assets are eligible for payments by instalments.

The assets eligible for payment by instalment are those which were historically deemed difficult to sell and include land, businesses, controlling shareholdings in companies and unquoted shares where particular requirements are met. You will note that this list does not include any of the more lifestyle type investment assets such as wine, classic cars, art or racehorses.

As for us probate lawyers; we are contending with the probate process increasingly moving online with more estates being eligible for the service. This should speed up the time in which probate is granted but does mean our maths may have to get even quicker.

Dominic Condé-Cole is an associate at boutique private wealth law firm Maurice Turnor Gardner LLP

Read more

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Why cases of forfeiture are often ‘not so black and white’

‘Life and law go on’: How attorneys are working through New York City’s lockdown

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