What Happens to Investments when Someone Dies?

Do you live in 1 of the 4 countries making up the UK? Find out What Happens to Investments when Someone Dies.

When a person dies, someone has to deal with his assets, investments, and property, and also pay his debts and liabilities. There are various scenarios that can come up. Laws of asset management vary with the presence and absence of a will, and even with the place of residence of the deceased.

The deceased may have left an arrangement for all or part of his investments, such as a trust fund or a nominee registration. In the absence of any such arrangement, a probate process will occur whereby the court supervises the distribution of the investments of the deceased.

The person who pays the taxes and debts and handles the distribution of assets on behalf of the court can be an executor or an administrator having different roles and legal procedures.

The discussion below sums up all the scenarios that decide what happens to the investments when someone dies.

What Happens to Investments When Someone Dies?

The owner might have nominated a beneficiary for the stocks he had owned or the mutual funds he had invested in. To transfer the investment assets to the designated beneficiaries as soon and easily as possible, there are two options:

  1.   Registration of a nominee
  2.   Trust Account

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If someone has availed of one of these options in his life, the transfer and distribution of assets to the beneficiaries take place rather automatically.

Ownership of mutual funds, stocks, and company shares is the same as owning property. With the registration of a nominee, the mutual fund or company stock shifts directly into the ownership of the designated beneficiary. The beneficiary is then responsible for taxes, debts, and income on the investment.

The person might also have created a trust fund in his life. A trust fund acts as a legal entity that can hold all kinds of investments such as stocks, bank accounts, businesses, and property on behalf of a designated beneficiary. The grantor (the person who created the fund) names a trustee who manages the trust until the beneficiary fulfils the conditions to inherit the trust. The condition can be age, place in life such as graduation, or death of the grantor. 

The assets shift directly to the ownership of the beneficiary and the probate process does not happen.

In all other scenarios, mutual funds, company shares, and stocks and their interest become a part of the deceased’s ‘estate’. What happens to these after the person dies depends on whether he has left a will or not.

Whether an applicable will is available or not, the estate of the deceased is subject to a legal process called probate.

The Probate Process

It is important to know whether the person who deals with the deceased’s assets and property will be an executor or administrator. They have different roles and responsibilities according to the law, which decide what happens to the investments when someone dies.

If the deceased has left a valid and applicable will, the person who distributes the assets to the beneficiaries is called an executor.

The role of the probate process or the court, in this case, will be to authenticate the will. The executor is then legally given the authority to act on behalf of the deceased.

If the deceased has not left a will, the person who deals with the estate is called an administrator.

Roles and duties of an administrator include:

  1.   Payment of debts
  2.   Payment of taxes, if applicable, on the income that the estate of the deceased generates
  3.   Evaluating and reporting the value of the estate to the court

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The court will then take the final decision on the distribution of the assets and investments among the beneficiaries. The first two duties overlap with those of the executor.

What Happens to the ‘Estate’ when Someone Dies?

The executor follows the procedure mentioned in the will. The administrator, on the other hand, fulfils his duties and reports to the court with an evaluation of the assets and investments.

The court directs and orders the transfer of ownership or the distribution of the estate according to the law. The laws of inheritance vary according to where in the UK the deceased had been living.

There are three major regions with different laws of inheritance in the UK. Here’s what happens to investments when someone dies without a valid will.

England and Wales

If the deceased had lived in England or Wales, all the assets, collectively called the ‘estate’, are distributed as follows:

The civil partner is the sole beneficiary of all assets worth up to 270,000 pounds (mutual funds, stocks, and shares).

The remaining part, if any, is divided into two equal parts. The civil partner or spouse gets to keep half, and the other half then is divided equally among the children (both adopted and biological).

If any child of the deceased had died but has a documented relation of parenting with the deceased, the share will go to his children (deceased’s grandchildren).

If the deceased has left no surviving civil partner, the whole estate is divided equally among the children.

Scotland

If the deceased was a resident of Scotland, the administrator distributes the estate among the beneficiaries as follows:

The civil partner gets the house if it is worth up to 473,000 pounds. If the house is worth more, the administrator sells the property and gives the legal spouse a lump sum of 473,000 pounds.

The rest of the property, assets, or the estate is divided into three parts. The civil partner gets one-third, and the remaining two-thirds are divided equally among the children.

If any child, biological or adopted, has already died, the grandchildren of the deceased will get the share.

Northern Ireland

Estate worth up to 250,000 pounds goes to the civil spouse of the deceased. However, the rules of Inheritance of Northern Ireland state that the property can be inherited by the partner if he survives for 28 days after the death of the deceased.

The rest of the estate is divided into three equal parts. One-third goes to the civil spouse, and the remaining two-thirds are divided into equal parts among the children. 

The Bottom Line

What happens to investments when someone dies depends upon the documentation such as an authentic will, registration of a nominee, or a trust fund arrangement. In the absence of a valid will, the court appoints an administrator for the lawful distribution of the investments and assets among the beneficiaries.

 

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