Who should you notify first about finances when a loved one dies?
It’s important to make contact with your loved one’s financial institution as early as possible to let them know what has happened. Most financial institutions have teams and processes in place to support you when a loved one passes away. You’ll likely need to provide information like the person’s date of birth, address, and other ways of identifying them. In some cases, you may need to provide a copy of the death certificate and complete a ‘notice of death of customer’ form.
To ensure your loved one’s estate is protected, the financial institution will then typically prevent further transactions from accounts where they were the sole account holder. However, you can usually request that specific existing payments continue, or arrange assistance with paying for funeral expenses if needed. Transactions from joint accounts should be able to continue as normal.
After a loved one’s death, you might think about also getting in contact with your solicitor who can start preparing to support you with legal aspects of the estate.
How do financial institutions handle a deceased ‘estate’?
‘Estate’ is the term used to describe all of a deceased person’s assets and possessions. How an individual wants their estate to be handled or distributed after their death is usually outlined in their will. A solicitor usually assists in writing a will, and an ‘executor’ nominated to carry out the instructions it contains.
is the executor of a will different to a beneficiary? Our Deceased Estate
guide explains the terms you may come across when a loved one passes
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Financial institutions have different processes about how they handle a deceased estate. But once they’ve assessed the circumstances, they’ll let you know what specific documents you need to provide.
There are typically two ways the process can work, depending on the how much money is in your loved one’s bank account. Each financial institution has its own ‘low-value cap’ where it can pay out the bank account without requiring probate or letters of administration. For example, CUA sets the cap at $15,000 while for other institutions it can be as high as $50,000.
1. Low value bank accounts
Once certified copies of the death certificate and last will and testament are provided, as well as proof of ID of anyone who will receive money from the deceased estate, the money will be distributed by the financial institution. It’s often simply paid to the executor of the estate who then distributes funds to any other beneficiaries according to the instructions in the will.
If there’s no will in place, the financial institution may need additional documents before proceeding.
Once the funds are distributed, any accounts where the deceased person was the sole account holder will be finalised and closed. The executor will be notified when the account is closed, and the estate is finalised.
If the deceased person is a joint account holder, they will be removed from those accounts and the remaining person will become the owner of the account. The account owner will then be able to use the account as normal.
2. Higher value bank accounts
This process is similar, but for larger estates you will also need to provide a certified copy of a ‘Grant of Probate’, which is a court document authorising the executor to carry out the instructions in the will. If the person died without a will, then ‘Letters of Administration’ are granted instead to the administrator of the estate. Your solicitor should be able to assist with that process.
Without a Grant of Probate, the financial institution may not be able to close the deceased person’s bank accounts and release the funds.
What happens if the deceased person has loans?
Any loans or debt in the deceased person’s name would need to be repaid using money in their estate.
If it’s a loan in joint names, the surviving borrower can typically choose to continue repayments, negotiate different terms or pay out the loan.
If Loan Repayment Insurance was taken out, the insurance provider may pay out the balance in full or part of it.
Other financial aspects to think about when someone passes away
If a life insurance policy is in place, you should think about contacting the insurer as soon as possible after your loved one passes away. The insurer would then normally provide you with a claim form to be completed, signed and returned.
To process the claim, the insurer would also usually need:
- The policy document and policy schedule
- Proof of claim eligibility (for example, certified copy of death certificate)
Home, car, health, landlord insurance etc
If it’s a joint policy, most insurers will ask for a certified copy of the death certificate in order to remove the deceased person’s name from the policy. For policies where they were the only person insured, the policy would stay in their estate until it’s cancelled by a person with the authority to do so (for example, the executor of the will).
Keeping insurance in place until the insured assets are sold will ensure they remain protected if something happens. If policy payments are made from a bank account that’s solely in the deceased person’s name, the executor would usually need to ask the bank to continue those payments.
Because there are specific laws covering superannuation, any funds a person has saved in super do not automatically become part of their estate when they die.
Specific instructions about who should receive the money may have been given to the trustee of the super fund in advance through a Death Benefit Nomination.
If a valid Binding Death Nomination is in place, the superannuation fund trustee will pay the superannuation benefit and any life insurance held in super to the beneficiaries listed in the nomination. Depending on who the beneficiaries are, and what rules apply, it may be paid either as a lump sum or a regular payment.
If no valid Binding Death Nomination is in place, the money will be distributed according to the rules of the super fund and relevant superannuation laws. In this case, the trustee will usually prioritise the spouse of the deceased and any young children.
It can be a good idea to speak to a financial planner to help you navigate these processes and for advice on what to do if you receive a payment from a super fund.
The importance of planning ahead
Your financial institution should do all they can to help you deal with a loved one’s finances when they pass away. But the process is usually much more straightforward if clear instructions are put in place in advance.
It’s about being prepared and having open conversations with loved ones now, so that when it comes time to finalising your estate, it’s a seamless process.
|Checklist – who to contact about finances when a loved one passes away|
|As soon as possible…||As soon as you’re ready…|
|Bank or credit union||Australian Government Department of Human Services (For Centrelink, Medicare, Child Support)|
|Financial adviser||Australian Tax Office|
|Insurance companies (including life insurance)||Local council|
|Solicitor||Local post office|
|Superannuation fund||Utility and telecommunication providers (electricity, gas, phone etc.)|
|Vehicle registration and licensing authorities|
Documents you might need:
- Certified copy of death certificate
- Certified copy of deceased person’s will
- Certified copy of Grant of Probate (if needed for larger estates) or Letters of Administration if there is no will
- Insurance policy documents
- Proof of your identity
Please note this is only intended as a general guide in relation to issues you may want to consider when dealing with a deceased estate. It is not intended to be an exhaustive list of all relevant issues and does not take into account your personal needs and financial circumstances. You should consider your own particular circumstances, and obtain independent expert advice where needed, before proceeding. Examples quoted are indicative only for illustrative purposes.
About Sonam Dang
Sonam Dang is a Member Servicing Team Leader at CUA, Australia’s largest credit union.