It's going to happen to us all, there's no stopping it. And yet so many of us live our lives as if death isn't inevitable. For most people, sickness will take them in their old age, which may give plenty of time to prepare.
For others however, death will come in their prime, leaving devastated families, and potentially finances, behind.
But what happens if you or a loved one dies unexpectedly? Does your family inherit your debts? Can they access your current account? Do you have to pay your mortgage if it's in both spouses' names? What about your mobile phone – do they have to continue the contract? And what about a car loan?
These are all questions which we will all ultimately have to face when a loved one dies, but ones which so many of us keep our heads in the sand about.
If you have already written a will, hopefully you have addressed many of these issues. If you haven’t, however, or if you did so a long time ago, you might have something to think about.
Keeping your finances in shape can help reduce stress at what is already a very difficult time.
1) Your bank accounts
You might be dead, but your financial accounts will continue to live on. Yes, until your “estate” informs the bank of your demise, money will continue to transfer into savings accounts, charges will be incurred on your account, and direct debits will be paid as usual.
Difficulties can arise when a spouse, or next of kin, is unfamiliar with that person’s financial information. How many accounts do they have? Where are they held? What about debts? And investments? And how can the bereaved access this money?
As a spokeswoman for AIB notes there is a "general lack of knowledge" among Irish people about what happens to your finances when you die and how probate works. If you're the family's sole, or bigger earner especially, your death can have significant ramifications on the family's finances in the short term should your accounts be frozen.
If the account is held solely in the name of the deceased for example, it will be frozen as soon as the bank is aware off the death. The proceeds of the account will fall into your estate and will be distributed to the beneficiaries of your will, or as per the rules of intestacy – but that’s generally a long process.
You will still be able to access some funds without the need of a grant of probate or letters of administration which arise when someone dies intestate (without a will), if looking for money to cover funeral expenses.
AIB for example, allows you to claim up to €5,000 to pay funeral expenses. You complete an application and indemnity to pay funeral and testamentary expenses.
Bank of Ireland will also allow payment for funeral expenses, directly to the funeral director.
“These are generally the only payments allowable until the estate is finalised,” a spokeswoman for Bank of Ireland says, though if there are any financial difficulties people can contact their branch or the special bereavement support unit.
An advantage of a joint account, however, is that “survivorship” applies. This means all the funds can pass directly to the named survivor on the account, so that a surviving spouse for example, won’t be restricted in accessing money in the days and weeks that follow a death.
This account can then be converted to a sole account.
If you have savings in a credit union, you’ll also be part of a life insurance scheme. The amount paid out in the event of a member’s death will depend on your age and how much you have saved with the credit union over the years.
Typically, every €1 saved before the age of 55 provides €1 of insurance. So someone who is 54 with €2,000 saved in the credit union, should be entitled to an insurance benefit of €2,000 should they die.
Over the age of 55, the benefits diminish, with someone aged between 65-69 earning 25 cent for €1 in savings. No insurance is payable on amounts saved after the 70th birthday.
For those earning almost zero interest on a deposit account, switching to the credit union would give an additional benefit in the event of an untimely death. And once you have earned these savings, the insurance stays in place, regardless of the age at which you might ultimately die.
Terms and conditions do apply however, and you should lodge the savings while you’re still in good health.
Keep an up-to-date list of your accounts and investments, either with your will, or give someone a password for access to a document containing this information.
You should also consider keeping a list of direct debit/standing orders that you would want to be reinstated and continued to be paid by your estate after your death.
2) Your loans
Maybe you took out a car loan in your name, or a credit union loan for a holiday, or have just overspent on your credit card. But what happens to these loans when you die?
Most financial institutions will simply pass these debts on to your estate – and interest will continue to accrue until they are repaid in full.
And, while the deceased’s family may be waiting on funds from their accounts to be released to settle day-to-day or other expenses, a lender is within its rights to take money from the deceased’s current accounts to pay off any loans they may have with that institution – before their estate gets to touch it.
“The bank will have the right to set off any debit and credit balances held in an account in the deceased’s name,” AIB says. If there aren’t sufficient funds to repay the loan, then the estate will also be liable “for any net debit balance due after death”, the bank says.
If the debt was taken out in both names, the surviving party will be liable for the loan.
Where there is not enough money in the estate to pay all outstanding debts, funeral expenses and the cost of administration of the estate, they will take priority, followed by secured debt (such as mortgages) and, finally, unsecured debts (eg personal loans).
If your loan is with a credit union however, it will typically be cleared upon your death. Typically, this is only offered up to the age of 70, but some credit unions will cover it up to the age of 85. Again, terms and conditions do apply. For instance, you can’t get a diagnosis of a serious illness and then take out a loan, expecting it to be covered by insurance.
Car loans can also be problematic. If the deceased entered into a hire purchase agreement to buy a car, for example, whether or not the estate will be on the hook depends on how much of the purchase price has been repaid; it all comes down to the so-called “half rule”.
According to Bank of Ireland, which arranges finance for Opel, if a customer has paid half of the hire purchase price (or more) and the agreement is up to date with no arrears, the car may be returned to the bank with no further liability. The estate can keep the vehicle and repay the rest of the loan if they so wish.
On the other hand, if less than half of the price has been repaid the estate will be liable for the contract. “Arrears, if any, must be paid and such sum to make up half the hire purchase price must be paid if that sum is not already paid,” the bank says.
Keep a record of outstanding loans and where they are held. And remember that it is the deceased’s estate that is liable for debts – not the deceased’s family. If a financial institution is trying to get you to take on the debts of the deceased, just say no.
3) Your mortgage
When it comes to mortgages, the good news is that some banks, including AIB, may allow a moratorium following the death of a borrower. This means the bereaved won’t have to scramble for funds to meet mortgage repayments while their finances are still up in the air.
Interest however, will typically continue to accrue on the mortgage until it is repaid in full by a life policy. If you have life insurance it’s worthwhile checking if this policy is assigned to your mortgage lender.
“This will reduce the delay in the insurance company making payment to the bank to clear the debt [during which time interest may continue to accrue] as the insurance company would not be required to wait for the grant of probate/letters of administration to be extracted first,” AIB advises.
According to Shona Chambers, financial adviser with John McColgan Financial Services in Donegal, mortgage protection claims usually go through "fairly quickly" in about four-six weeks or so.
“What usually what slows it down is a doctor filling out the report,” she says.
4) Your utilities
The gas bill is in your name; the electricity in his. You’re loyal to Bord Gáis but your husband was forever seeking out the best deals. Now he has died unexpectedly and your bank has stopped withdrawals and direct debits from his account.
You will need to contact your gas provider and arrange an alternative form of payment – but who is your gas provider? In the era of paperless billing, it can be a further complication if such information isn’t shared.
Another issue can arise with mobile phone contracts. If you die with 10 months left on your contract, must your estate settle the amount outstanding?
Fortunately, it appears not. According to Three, in the event of a customer’s death, an executor can contact the mobile operator and the account will be closed “with no outstanding costs pursued”.
