The emotional consequences of bereavement are tough, but it’s a time when practical steps need to be taken. Danny Cox, chartered financial planner at Hargreaves Lansdown, explains what executors must consider.

As an executor, your job is to ensure that the wishes of the person who died are carried out. These wishes will usually be laid out in their will. Broadly speaking, after registering the death, administering the estate can be divided into the following steps:

• inform everyone who needs to know (eg government organisations)
• value any assets and liabilities (including ISAs, investments and cash)
• identify the beneficiaries
• calculate any tax due
• apply for a grant of representation/probate (including settling outstanding taxation)
• collect the assets
• pay any creditors
• distribute the assets

Executors normally produce estate accounts at the end of the process that show how the estate has been distributed. These should detail assets, liabilities, taxation, and any expenses that are incurred.

Valuing the assets

All worldwide assets, such as cash and investment accounts, ISAs and shares, are valued as at the date of death, but are not distributed until probate is granted. Taxes are also normally paid based on the date of death values. However, the actual value at distribution is often different, as investments can fall, as well as rise, in value.

Dealing with ISAs and investments

After relatives and friends, organisations such as banks, building societies and investment and pension companies all need to be informed. Each provider will be able to explain how they deal with a deceased’s accounts, and all will require sight of the death certificate, so it is worth obtaining a number of copies of this in advance.

ISA and investment companies will distribute the proceeds as the executor instructs, either as a cash payment to a central account for onward distribution, or transfer the investments themselves ’in-specie’, direct to specific beneficiaries. 

Dealing with shares

Shares that are held through a nominee service, such as an investment supermarket or platform, are dealt with in the same way as ISAs and other investments.

Shareholdings where the deceased held the certificates are normally reregistered in the name of a beneficiary, once probate has been granted. Executors should contact the registrars listed on the reverse of the share certificate for details of what they need to do.

Dealing with pensions

Most pension schemes are written under a form of trust, so are valued separately and outside of the deceased’s estate. So they are not included in probate valuations or calculations, and will normally be inheritance tax-free.

The death benefits payable from a pension plan will also depend on the type of pension, and whether or not it is already in payment.

In some cases, a pension may also offer life assurance or a guaranteed death benefit element. Or an employer may offer ‘death in service’ benefits. Executors should obtain full details of what each scheme offers, and in the absence of a scheme booklet, the pension scheme administrators should be able to help.

Company pensions: the death benefits will usually depend on whether death occurs before or after retirement. If death occurs before retirement, the benefits are often paid as a tax-free lump sum. If after retirement, they are usually paid as a taxable income.

Private pensions (including SIPPs, personal and stakeholder pensions): from April 2015, the death benefits under a private pension depend on whether death occurs before the age of 75. If before age 75, the full value of the private pension is normally payable direct to beneficiaries as a tax-free lump sum. After age 75, the beneficiaries are taxed at 45% on income or capital payments.

Can executors pay for help and advice?

Executors can seek and pay for the advice of a professional if and when needed. Simple estates can often be administered without the additional cost of taking advice. However, when things are more complex, or if in doubt, executors should always seek help.

Make the process easier for those you leave behind

One of the hardest jobs an executor has is identifying all the assets. This normally requires considerable effort working through bank statements and other paper records.

A simple asset register kept in a secure place with a will makes this process much easier for those you leave behind.

About the author

Danny Cox is head of communications at Hargreaves Lansdown, and holds chartered financial planner status. Follow on Twitter @HLInvest.