Life insurance and wills
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Making a will is the sensible way to guarantee that your assets go exactly where you want them to after you’ve gone.
In your will, you’ll need to name the person or people you want to appoint as executors. This is a family member, friend or professional who is hired to carry out the administration of your will after your death.
An executor is a person of your choosing who will carry out your instructions and wishes after your death. They’ll administer your estate as detailed in your will.
Typically, their duties will include applying for probate, locating all financial documentation, sending death certificates to banks and freezing accounts. They’ll also need to pay any bills and debts including inheritance tax, collect all money owed to the deceased, sell property and share out money to the will’s beneficiaries.
An executor can be anyone of your choosing who is over 18, even beneficiaries of your will.
Some people choose their spouse, partner, grown-up children or other family members. But, because of the complex financial transactions and legalities involved, many people appoint a professional, like a solicitor - though they will charge for the service. You could even appoint a solicitor as well as a family member.
Most people elect one or two people to undertake the role of executor, though you can choose up to a total of four people.
They must act together and agree on things jointly, so it’s important you consider this when deciding on your executors. Having too many may cause friction, confusion or delays in administering the will.
Whoever you choose, you’ll need to trust them and feel that they’re able to take on the legal, financial and practical aspects of the role, which can be complicated.
You should always ask if they’re happy to take on the role before nominating them.
If you don’t appoint a solicitor as your executor at the time of writing your will, your chosen executors can still choose to appoint one to help them if they feel they need professional help and expertise.
Part of the responsibility of being an executor is paying off any outstanding debts from the estate.
They should check if the person who has died has life insurance to pay off any debt, like the mortgage.
If it becomes apparent that the estate is insolvent - that it doesn’t have enough assets to cover debts and expenses - then the executor will need to appoint a solicitor to administer the estate.
Every will is unique and will have different complexities. But an executor will usually need to take the following steps:
It’s up to the executors to work out whether any inheritance tax is due and to pay the full amount to HM Revenue and Customs (HMRC).
This will depend on how much the estate is worth.
Inheritance tax may have to be paid on the estate if it’s worth more than £325,000. The standard inheritance tax rate is 40% - charged on everything over this threshold.
However, there’s normally no inheritance tax to pay if everything above the £325,000 threshold is left to a spouse, civil partner or charity.
Passing away without a will is known as dying ‘intestate’. In such a case, the estate of the deceased person is shared out following the rules of intestacy.
These rules share out the estate between close or blood relatives.
For example, in England and Wales:
The claim can be made by the beneficiary of the policy - or by the executors of the will. It’s then paid to the beneficiary in due course.
When you’re taking out a life insurance policy, it’s always important you include details of it in your will and also let your beneficiary know about the policy so they can claim for the money.
Whoever is making a claim on the policy will need to provide the insurer with some details. This includes the name of the deceased, the life insurance policy number, as well as the cause of death and a copy of the death certificate.
When the claim has been accepted, then the payout can be made.
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