What Happens to Your Money When You Die in the UK: Probate, Tax & Distribution

When you die in the UK, your money and assets (your **estate**) pass through a legal process called **probate** (or **confirmation** in Scotland). Here's the step-by-step.

1. Identify the Estate

• All assets: bank accounts, investments, property, pensions (sometimes), life insurance (if not in trust), personal possessions.
• Joint assets (joint tenants) pass **automatically to survivor** — outside will/probate.
• Nominated beneficiaries (pensions, life insurance in trust) pass **directly** — outside estate.

2. Will or Intestacy?

• Valid Will: Executors apply for **Grant of Probate**; estate distributed per will.
• No Will (Intestacy): Administrators apply for **Letters of Administration**; estate split per **statutory rules** (spouse/civil partner + children, then parents, siblings, etc.). Unmarried partners get **nothing** automatically.

3. Pay Debts & Taxes FIRST

• Funeral costs, debts (mortgage, credit cards, loans), **Inheritance Tax (IHT)**.
• IHT Threshold (2024/25): **£325,000** (nil-rate band) + **£175,000** residence nil-rate band (if leaving home to direct descendants) = **£500,000** per person potentially tax-free.
• **Rate:** 40% on value above threshold (36% if ≥10% to charity).
• Spouse/civil partner exemption: **Unlimited, tax-free** transfer.

4. Distribute the Residue

• After debts/IHT, executors distribute per will or intestacy rules.
• Specific legacies (cash, items) paid first; residue split per percentages.
• Trusts may be created (for minors, vulnerable beneficiaries, tax planning).

5. Timeline & Costs

• Simple estate: 3–6 months.
• Complex (property, disputes, IHT): 12–24+ months.
• Costs: Probate fee £273 (estate >£5k); solicitor 1–5% + VAT; IHT professional valuation.

Scotland & Northern Ireland

• Scotland: **Confirmation** (Sheriff Court); different intestacy rules (prior rights, legal rights).
• NI: Similar to England/Wales; separate probate registry.

Proactive Steps

• Write a **will** (update every 1–2 years or on life events).
• Use **pension nominations**, **life insurance in trust**, **joint ownership** strategically.
• Consider **lifetime gifts** (7-year rule for IHT).
• Keep **asset list** (digital + physical) accessible to executors.

Dying without a plan leaves a mess. A few hours of planning saves months of grief.