What happens to money when you die

Estate planning is postponed by almost everyone, and the cost of the postponement falls entirely on people who are already dealing with a death.

Without a will

What happens.

Intestacy rules determine distribution, and they differ from what most people would choose.

Unmarried partners receive nothing under the intestacy rules of many jurisdictions, regardless of how long the relationship lasted.

Stepchildren generally receive nothing.

Distribution between a spouse and children follows fixed formulas that may not reflect the family's needs.

Administration is generally slower and more expensive.

And guardianship of children is decided without any recorded preference from the parents.

What a will does

Beyond distributing assets.

Names guardians for children, which is frequently the most important provision.

Appoints executors, who administer the estate.

Distributes assets according to your wishes.

Can establish trusts for children or vulnerable beneficiaries.

Can record funeral wishes.

And can reduce inheritance tax in some jurisdictions through structuring.

It must be executed correctly to be valid, with signature and witnessing requirements that vary and that must be followed exactly.

Assets that do not pass under a will

The point most commonly missed.

Pensions in many schemes pass according to a nomination form held by the scheme, not according to a will.

Which means an outdated nomination — naming a former partner, for instance — overrides the will.

Life insurance written in trust pays to the named beneficiaries directly and outside the estate.

Jointly owned property held in a particular form passes automatically to the survivor.

Joint bank accounts generally pass to the survivor.

Which makes checking and updating nominations at least as important as making a will, and considerably easier.

When to review

Life events that should trigger it.

Marriage or civil partnership, which revokes a will entirely in some jurisdictions.

Divorce, which affects provisions relating to a former spouse.

The birth of children or grandchildren.

A death among beneficiaries or executors.

Buying property.

Significant changes in assets.

Moving country, since wills may not be effective across jurisdictions.

And any change in relationships that affects your wishes.

Power of attorney

Which matters before death.

Documents allowing named people to make decisions about finances and about health if you lose capacity.

They must be set up while you still have capacity — afterwards, the alternative is a court process that is slow, expensive and stressful.

Separate documents commonly cover financial and health matters, and both are worth having.

Without them, a spouse cannot access accounts or make decisions, which surprises almost everyone.

And this is relevant at any age, since capacity can be lost suddenly.

The practical file

The document nobody makes.

A single list of every account, policy, pension, investment, debt and property, with provider and reference.

Digital accounts and how to access them, which is an increasingly significant gap.

Where the will is held.

Key contacts: solicitor, accountant, adviser, employer.

Funeral preferences and any prepaid arrangement.

And where the documents are.

Kept updated annually and accessible to whoever will need it, which is the entire point.

Inheritance tax

Which varies enormously.

Some jurisdictions tax estates, some tax recipients, some do neither, and thresholds and reliefs differ substantially.

Common features: allowances that may transfer between spouses; reliefs for business and agricultural assets; treatment of gifts made within a period before death; and the treatment of the family home.

Which makes this an area where advice is worth paying for above modest estate sizes, and where do-it-yourself planning can produce expensive errors.

Practical steps for the family

When a death occurs.

Register the death and obtain several copies of the certificate, since many organisations require one.

Use any single-notification service that exists locally for government bodies.

Notify banks, pension providers, insurers, utilities and creditors.

Do not pay debts personally or distribute the estate before debts are settled.

Check for life insurance and death-in-service benefits, which are frequently overlooked.

Check for bereavement benefits, which exist in many jurisdictions and are under-claimed.

And take advice where the estate is complex, contested or insolvent.

Getting it done

Which is the actual barrier.

Solicitors offer fixed-fee wills for straightforward situations at modest cost.

Some charities run free will-writing schemes.

Public guardian or equivalent bodies publish free forms for powers of attorney in several countries.

Online will services exist and suit simple situations, with the caveat that execution requirements must still be met exactly.

And the whole exercise takes a few hours, which is the smallest investment with the largest protective effect available in personal finance.

General information only, not financial or legal advice. Rules vary enormously by country — consult a qualified solicitor.