Death Tax, Insurance Review, Benefits – what you might be able to claim, Budgeting, Income – what if your partner dies.
When a person passes away there are many distressing times to get through and lots of practical things to think about. One of them is finances, quite a responsibility to take on and a very important one too. We have put together a list of important financial information to help you through this time
Death Tax
The first thing to address is death tax. You may have heard about death tax recently as it was in the news last November for quite some time. Death tax, also known as inheritance tax, is tax paid on the estate of somebody who has died. Your ‘estate’ includes assets such as:
- Money you have in the bank
- Investments
- Properties or businesses you own
- Vehicles
- Insurance policy payouts
There are times when NO inheritance tax is paid. These are:
- When the value of your estate is below £325,000. Even if the estate is below this threshold, you still need to report to HMRC. Above that amount, anything you leave behind is subject to tax of 40% (or 36% if you leave at least 10% of your assets to a charity).
- you leave everything above the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club. If you leave your home to your children (including adopted, foster or stepchildren) or grandchildren, your threshold will increase to £450,000.
- People in certain job roles are exempt from paying inheritance tax if they die in active service. This includes armed forces personnel, police, firefighters, paramedics and humanitarian aid workers.
If you’re married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die. This means their threshold can be as much as £900,000.
Money given away as a gift before you die is still counted as part of your estate providing you die within seven years of giving it. Early planning of how to pass on your assets is important. If you make large lifetime gifts, beneficiaries can take out life insurance against the pending inheritance tax bill. Payment of Inheritance Tax at a reduced rate of 36% can be applicable on some assets if you leave 10% or more of the ‘net value’ to charity in your will.
If you’re not married, but own assets jointly with another person who has passed away, your liability to pay inheritance tax will depend on whether you and your partner own the property as ‘joint tenants’ or ‘tenants in common’ and whether there’s a will.
If you’re joint tenants and your partner has left you everything in the will and your partner’s assets (including the property) exceed £450,000, you will have to pay tax on any assets worth more than that. The property will then be owned by you.
Even if your partner didn’t leave a will, the ‘right of survivorship’ will ensure the property still goes entirely to you, though inheritance tax rules would still apply.
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Benefits
There are several different benefits available when someone close to you dies. Read further to see if you may be eligible for any of them.
Bereavement Allowance
Formally known as a widows pension, Bereavement Allowance is a payment received if you meet the following criteria:
- Your spouse/civil partner died before 6 April 2017. If your spouse or civil partner died on or after 6 April 2017 you may be eligible for Bereavement Support Payment instead
- You were 45 or over when your spouse/civil partner died
- You are below State Pension age
- Your late spouse/civil partner paid National Insurance contributions, or died as a result of an industrial accident or disease
You will not get Bereavement Allowance if:
- You are raising children. You can claim Widowed Parent’s Allowance instead
- You remarry or form a new civil partnership
- You live with another person as if you’re married or in a civil partnership
- You were divorced from your husband, wife or civil partner before their death
- You were over State Pension age when your spouse passed away, in which case,you may be able to get extra State Pension
- You are in prison
Bereavement Payment
There is a £2,000 Bereavement Payment available if your spouse or civil partner died before 6 April 2017. This is a one-off, tax-free, lump-sum payment. If your spouse or civil partner died on or after 6 April 2017 you should apply for Bereavement Support Payment instead.
You may apply for Bereavement Payment if, when your spouse/civil partner died, you were either under State Pension age or over State Pension age and your spouse or civil partner was not entitled to a State Pension based on their own national insurance contributions.
In order to claim, your spouse/civil partner must have either:
- Paid sufficient National Insurance contributions
- Passed away as a result of an industrial accident or disease
You can not get Bereavement Payment if any of the following apply:
- You were divorced from your spouse/civil partner
- You are living with another person as a spouse or civil partner
- You are in prison
Widowed Parent Allowance
This is a benefit you can apply for if all the following criteria apply:
- Your spouse or civil partner died before 6 April 2017, If they died on or after 6 April 2017 you may be eligible for Bereavement Support Payment instead
- You are under State Pension age
- You are entitled to Child Benefit for at least one child and your late husband, wife or civil partner was their parent
- Your late spouse or civil partner paid National Insurance contributions, or died as a result of an industrial accident or disease
You may also claim when pregnant and your spouse has died, or you’re pregnant after fertility treatment and your civil partner has died.
You cannot claim WPA if you:
- Were divorced from the deceased
- Remarry or are living with another partner.
- Were over State Pension age when widowed or became a surviving civil partner – you may be able to get extra State Pension though
- Are in prison
Bereavement Support Payment
This is a payment you can receive if your spouse or civil partner died on or after 6 April 2017, providing:
- They paid National Insurance for at least 25 weeks
- They died due to an accident at work or a disease caused by work
When they died you must have been:
- Under State Pension age
- Living in the UK or a country that pays bereavement benefits
You cannot claim if you are in prison.
Funeral Expenses Payment
This payment will be deducted from any money you get from the deceased’s estate.
Funeral Expenses Payment can be put towards some of the following costs:
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- Burial fees
- Cremation fees and doctor’s certificate
- Travel arrangements for the funeral
- Moving the body if it’s being moved more than 50 miles, UK only
- Death certificates/other documents
You can also apply for up to £700 towards any other funeral expenses, such as funeral director’s fees, flowers or coffin. This will not cover everything though and payments depend on your circumstances. If the deceased had a pre-paid funeral plan, you are only eligible for up to £120 to cover items not included in their plan.
Budgeting After The Death Of A Partner
The death of a partner is one of the most stressful life events there is and to make things even worse, you suddenly find yourself responsible for everything on your own, including finances, which can feel overwhelming. To help you through this difficult times, we have gathered some of the important financial information you will need to think about.
Bills
Whoever organised bill payment before, make sure they are all in your name and if not transfer them straight away, making sure all payments are up to date. The last thing you want is late payment fees, debt collection or a bad credit score for missed payments.
Practical steps:
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- Gather all household the bills
- Make a list of the date and exact amount of each payment
- Check you have enough money to cover these bills
- If any bills are usually paid from your partner’s account they may not get paid since the account may be frozen. You must contact the companies to inform them of your partner’s death and change the payment/contact details.
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Transfer From A Joint To Individual Bank Account
If you had a joint bank account with your partner, you should still be able use it as normal but you must notify the bank or building society that your partner has passed away. Taking your partner’s name off the contact details should make it easier to manage your money and see whether you have enough every month to pay the bills.
Credit Card, Loans And Mortgages
If your partner had any credit such as credit/store cards, a loan or a hire purchase agreement or mortgage, these could still have an outstanding balance. It is important to deal with them as soon as possible.
Put together a list of debts with a total of what is still owed on each. This will help you prioritise the debts and deal with them in a logical manner
Taking Over The Mortgage
You need to speak to your mortgage lender and inform them that your partner has passed away.
They will then let you know your options.
The mortgage is usually one of the first debts that is paid out of the estate unless an insurance payment was taken out by your partner at the same time as the mortgage.If there isn’t enough money to cover this, there are a couple of options:
- Taking out a mortgage in your name if you think you can afford the repayments on your own. This is not just a simple transfer, even if you had a joint mortgage with your partner. You will have to go through a review process as though it’s a new mortgage application.
- If you are unable to get a mortgage you may have to sell your home to clear this debt.
Income And Tax
Until you’ve completed all the legal paperwork and gain access to your partner’s assets, you won’t be able to access any money they held in their name. You may have to wait several months before insurance policies pay out which can leave you financially insecure. It may also take some time for any ‘death-in-service’ benefits to come through. Take a look at the benefits section above to see if you are eligible for any help from the government and look at our budgeting section to tide you over whilst you get yourself back on your feet.
When it comes to the amount of tax you pay, in the year of the death of your spouse or civil partner, how much you will be billed for will depend on how you were taxed before they died. You may have been taxed under joint assessment, separate assessment or separate treatment.
Pensions
If your spouse or civil partner dies, this may affect your state pension entitlement. In some situations, you may be able to claim more state pension. If you do get a new or extra, state pension due to the death of your spouse or civil partner, you must make sure that HMRC are aware otherwise your own tax position may be incorrect.
You may be entitled to the extra state pension that your spouse or civil partner claimed because they deferred payment when they reached state pension age.
Be sure to investigate with HMRC exactly what you are entitled to claim.
Get a Quote
If you want to be in charge of your own funeral you can do so with a prepaid funeral plan quote. If you want to learn more we have put together comprehensive information on funeral plans so you can make a fully informed decision.