When do I need to inform the banks (particularly NS&I) of my mother’s death?

Uglymug

My mother passed away about 6 weeks ago. Until then I had Power of Attorney and handled all her finances.

I’m executor of her will.

I’ve registered her death and have multiple copies of her death certificate.

I’ve had her cremated and am in possession of her ashes.

I’ve contacted the “Tell Us Once” service and her State Pension and Attendance Allowance has ceased.

I’ve contacted her Private Pension and that has also ceased.

I’ve instructed her solicitor to sort out her inheritance tax and to prepare and send the various Inheritance Tax Forms to HMRC and then to apply for probate. I’ve given her solicitor a rough estimate of the value of her estate (circa £900K). My mother’s husband (my father) passed away nearly 3 years ago, he left everything to my mother. They both lived in a Care Home, their house having been sold for circa £370K nearly 5 years ago. I’m hoping that there will be no inheritance tax to pay due to their individual allowances of £375K and their house allowance of £350K.

My mother had about £100K invested in shares with an online broker, I’ve contacted them, and have received a valuation for probate purposes. The shares will have to remain invested and untouched until they receive the probate forms.

The other £800K is in cash invested with various banks, the majority with NS&I. She only had a few other personal belongings with her in her Care Home. I recall on my father’s death I informed all the banks and they transferred all his funds into holding accounts. I seem to recall the interest these accounts paid was very derisory. My concern is that if I inform the Banks of her death the estate could end up losing circa £30K a year it receives in interest payments. When her various fixed rate accounts come to an end there won’t be any options to re-invest. So my question is “When do I need to inform the banks of my mother’s death?”.

(Also does anyone know what NS&I do whilst waiting for probate, do they also have a holding account paying no interest?)

born_again

Sorry for the loss. In reality you should have informed them 6 weeks ago. 

Savvy_Sue

born_again said:

Sorry for the loss. In reality you should have informed them 6 weeks ago. 

And that's also when your power to act as her attorney ended. 

Was there a reason why you thought you should instruct a solicitor to apply for probate? Had you not done so, given that there is no house to sell, you could have considered interim distributions to the beneficiaries, leaving enough to settle any final bills. You are now in their hands, unless you can amend their instructions to JUST calculate the IHT, and then you take the process of applying for probate forward. 

Runner_Duck

All the banks I dealt with after my mother's death continued to pay full interest until the account(s) were closed after we had the Grant of Probate. The accounts were a mixture of fixed term bonds, Easy Access and NS&I Income Bonds.  One a 3 year bond, matured during the process, was moved to an Easy Access and actually received a better rate than the original bond.  The NS&I account paid the same interest as before her death. The estate is going to have a significant tax bill if there is £30K interest paid.  When/if IHT is paid make sure it comes from non ISA accounts first.  I believe the ISA accounts remain tax free until the account is closed.

tacpot12

This link on the NS&I website confirms that they the accounts continue to pay interest until they are closed: What to do if an NS&I customer has died | Help | NS&I (nsandi.com)

Uglymug

Savvy_Sue said:

born_again said:

Sorry for the loss. In reality you should have informed them 6 weeks ago. 

And that's also when your power to act as her attorney ended. 

Was there a reason why you thought you should instruct a solicitor to apply for probate? Had you not done so, given that there is no house to sell, you could have considered interim distributions to the beneficiaries, leaving enough to settle any final bills. You are now in their hands, unless you can amend their instructions to JUST calculate the IHT, and then you take the process of applying for probate forward. 

Could someone elaborate? Is it possible to make interim distributions if I apply for probate myself rather than go through a solicitor? I thought as soon as I notify the banks of my mother's death they would lock all accounts until they receive probate.

Uglymug

Many thanks for all your comments, especially those confirming that NS&I will still pay interest.

Keep_pedalling

Uglymug said:

Savvy_Sue said:

born_again said:

Sorry for the loss. In reality you should have informed them 6 weeks ago. 

And that's also when your power to act as her attorney ended. 

Was there a reason why you thought you should instruct a solicitor to apply for probate? Had you not done so, given that there is no house to sell, you could have considered interim distributions to the beneficiaries, leaving enough to settle any final bills. You are now in their hands, unless you can amend their instructions to JUST calculate the IHT, and then you take the process of applying for probate forward. 

Could someone elaborate? Is it possible to make interim distributions if I apply for probate myself rather than go through a solicitor? I thought as soon as I notify the banks of my mother's death they would lock all accounts until they receive probate.

It depends how much is in them, banks have quite high levels that they will release without probate, Lloyds for instance will release up to £50k. 

Whether probate is need or not you must inform them of her death and cease to use your POA to make any transactions.

if you can avoid using a solicitor not only will you save money you will be able to wind the estate up much faster. You will need to do a full IHT return, but that is not as daunting as it looks and you will get plenty of help here if you need it.

RAS

Solicitors take longer because they wait 6 months after probate for any adverse claims or debts. They don't like doing interim distributions because they have to send out 2 lots of accounts.

You could pull in a lot of the money from the bank accounts, distribute much of it then wait for the NS&I accounts, plus any over the limit before a final accounting.

Shedman

Given there is a lot of savings in her estate then just be aware that any accrued interest (and dividends for that matter) at the date of death (the banks will supply a figure) and which could be a significant sum if they are fixed term savings that only pay out on maturity, especially if they are longer term ones that have been held for a while, has to be included in the figure used for the IHT calculation 

But for income tax purposes the interest is regarded as taxable when it is actually credited to the accounts so this will almost invariably be after date of death and hence becomes a tax liability of the estate.  The estate gets no allowances, such as personal allowance or personal savings allowance, so the whole amount is taxable at the estate rate of 20% (likewise for dividends at dividend rate of 8.75%j.

This can mean potentially being double taxed - if IHT if payable then the accrued interest would suffer IHT at 40% and then will also suffer 20% income tax (seems inequitable to me).

You will also need to issue R185 (estate income) forms to the beneficiaries which detail their share of post death estate income and tax paid as estate income is regarded as income to the beneficiary and has to be included in their own tax returns but they can offset the tax paid by the estate or if a non taxpayer can reclaim it.

I've just been researching this as my MiL died in mid April and I initially thought that the accrued interest at date of death would be regarded as part of her taxable income and, as she has virtually the whole of her personal allowance etc for this tax year available, assumed that there would therefore be no tax to pay on it.  Unfortunately, I found out I was wrong and its all going to be taxed as estate income at 20%.  As the accrued interest is nearly £10,000 then that's £2,000 more that will come out of her estate than I expected.  (Interestingly had she died 2 weeks earlier then this treatment would have been advantageous as she would have paid income tax at 40% if it had been to her account....)

Bobziz

@Shedman "But for income tax purposes the interest is regarded as taxable when it's actually credited to the accounts"

I'm in the same position and I understand that 'arisen' is the key word rather than credited. Nationwide credit their online fixed rate bond accounts with interest on each anniversary and on maturity. However, the interest is only accessible and has therefore only arisen for tax purposes on maturity. The fact that they report interest credited annually to the HMRC is unhelpful.