“Nothing is certain but death and taxes”, so the old saying goes. Which leaves the question: What happens to my investments if I pop my cogs?
Several things can happen to your investments when you pass away. But the actual cause of action depends on a few factors, including the type of investments you have, and whether you’ve set up a will and named a beneficiary.
In this article, we will explain what happens to your investments if you die, and what steps you need to take to ensure your assets end up with the people you care about.
Let’s get right into it.
What Happens If the Sole Account Holder Passes Away?
If the sole owner of a bank account dies, it’s crucial to know if someone is listed as a beneficiary. Many banks allow their account holders to name a payable-on-death (POD) beneficiary.
Naming someone as a POD beneficiary to your account won’t grant them access to your funds while you’re still living. The bank will only transfer money to the person you designate after it learns of your death. Even then, the named person must present a valid government ID as well as a copy of your death certificate.
If the account holder did not establish a beneficiary before passing, the process gets more complicated. In most cases, the estate is declared intestate and goes through the probate process instead of directly to the deceased’s survivors.
Probate is an expensive process. Avoid it as much as you can if you want your loved ones to receive the money in the quickest, simplest, and least stressful way possible.
What Happens to Joint Accounts If Someone Dies?
Joint accounts often include automatic rights of survivorship. Meaning if one account holder dies, the money in the account immediately goes to the surviving joint holder (or holders). The probate process is not involved and your share of funds is not included with your estate.
However, if the only surviving holder of the joint account is a secondary holder, then the account gets closed. The account’s secondary holder will be able to access the money after the settlement process is complete.
Still, it’s important to confirm if your joint account has automatic rights of survivorship. Because if it doesn’t, chances are the bank will freeze the account after one of the holders dies, affecting the remaining holder’s ability to access funds.
How to Ensure Your Investments Are Left to the Right People?
If you don’t want the courts deciding what happens to your assets after you pass away, planning ahead is key. Creating a plan allows you control over who gets what after you die.
Take the following proactive measures to make sure your loved ones will receive what you want them to:
Outline Your Wishes and Priorities
Before putting pen to paper, first think about where your money and possessions should go after you die. Outlining your wishes and priorities will help guide the rest of the planning process.
Ask yourself the following questions when listing your wishes and priorities:
- Who relies on your income? Is it your surviving spouse and children? Your parents? Other family members?
- Do you need to fund your kids’ education? Or to support your grandkids’ scholarship?
- Are you planning on leaving money to support a special cause? To donate to charity, perhaps?
Write a Will
You can control what happens to your investments by creating and leaving a will in advance. A will is a legally binding document that dictates what happens to your assets after you die.
Your assets can include everything from your estate stocks and cars, to heirlooms and other belongings. In your will, create a detailed list of these assets and make clear who should receive what.
You might want to seek help from a solicitor when setting up your will, especially if you have a large estate or when using UK will online services. Make sure you also nominate an estate executor—someone who will carry out your wishes—in your will.
A will forms the foundation of estate planning. If you pass away without writing a will, intestacy rules will determine what happens to your investments. This can complicate things for your loved ones and their chances of not receiving what you hoped they would are so much greater.
Designate Your Beneficiaries
Most brokerages and investment accounts offer an option to designate beneficiaries. Choosing your beneficiary designations can prevent the costly probate and reduce tax liability for your survivors.
You can designate beneficiaries on various accounts, titles, or policies, including:
You can add beneficiaries when opening the account. Beneficiaries can be removed or updated at any time.
Savings and investment Accounts (e.g. mutual funds, stocks, and bonds)
You can set up designations from the beginning or contact the bank to update your existing account.
Life insurance policies
Add beneficiaries when signing up for the policy. Again, designations can be added or changed depending on circumstances.
Title the home with rights of survivorship for your spouse or other joint owner to assume ownership without going through a formal legal process.
Leverage Power of Attorney (POA)
A power of attorney is a legally binding document that allows someone you trust to act or make decisions on your behalf until you pass away. A lasting power of attorney (LPA) will usually cover decisions regarding your property and finances as well as your health and welfare.
A health and welfare LPA will only take effect when you lose your mental capacity. On the contrary, a property and finances LPA can become effective any time you no longer need to make decisions on your own.
You might have thought that your spouse would automatically take charge of your investments and make decisions about your health if you lose the physical or mental capacity to decide for yourself. However, without a POA, they would need to get authority from the Court of Protection. This process can take time and is not always guaranteed.
Establishing a proactive plan today ensures that your heirs can get access to your investments after you pass away. To give you peace of mind that your loved ones will be financially protected when you’re gone, draw up a will with the help of an attorney to outline who gets what.
Of all the steps you can take to ensure your assets are passed down to your beneficiaries in the most efficient manner possible, the most important step is to set up a will. Write your will as soon as possible to make your survivors’ lives easier when you pass away.