Over the past few weeks, I have been helping my wife act as the executor of her late father’s estate. Despite a 25-year career as an adviser for some very wealthy people and being quite familiar with the tasks involved in dealing with the financial affairs of a deceased person, I have found this time to be quite onerous.
My father-in-law had me keep an eye on his financial affairs during his lifetime, which included periodical paper purges and tidy-ups on his behalf, but he still left a mountain of financial and legal documents that needed sorting through. I even found old premium bonds that no one, not even his wife, knew about.
Unless very small or qualifying for total exemption, most executors are required to report the deceased’s estate to HM Revenue & Customs using form IHT400. If you have not seen this before, or have not looked at it for some time, I would encourage you to download it from HMRC’s website. The basic form is 16 pages but it can easily run to double that with additional schedules.
The guidance notes for IHT400 are 92 pages, which illustrates the potential complexity faced by executors. While many people will engage a solicitor or licensed probate adviser to handle the formalities of dealing with the estate, they will still need to provide detailed information on the deceased’s financial affairs.
As well as savings and investment account names and numbers, the executors need to know other things like gifting history, tax history, the form of crystallised pension benefits and any trusts created in the deceased’s lifetime.
In my experience, details of loans made by the deceased can be a very contentious issue. I remember a widow of a client desperately try to prove her late husband had lent a business associate £250,000, not gifted it as the business associate contended. The widow never got the £250,000 back. A loan agreement might have avoided the financial loss and anguish she suffered.
And let us not forget the most basic question that needs answering – the location of the original will. I recall the case of a wealthy individual dying without telling anyone where he had stored his will. It took many months to track it down before his estate could be dealt with.
One of the key benefits of working with a financial planning firm is the fact they get and keep people well-organised. Winding up an estate is so much easier and quicker if so.
But like insurance, families often only realise the value of having the assistance of a financial planner after someone dies.
IHT400 offers advisers a great opportunity to demonstrate their value to both existing and potential clients. Why not go over it with clients at your next review meeting? You might uncover information that could be very helpful to executors.
You could also raise the question of whether your client has agreed to act as an executor for relatives or friends. And, if so, whether they could gather all the necessary information to deal with the estate if the time comes.
If you want to reassure your clients you have got their back and also gather potential client introductions, IHT400 could be one of the best tools out there.
Jason Butler is an expert on financial wellbeing and head of financial education at Salary Finance. Find him Tweeting @jbthewealthman