Potential IHT And Fraud Implications Thanks To Bank Handout
It has been revealed that banks are handing out tens of thousands of pounds to bereaved families before going through the probate process.
The money, some lawyers believe is being handed to relatives who have no legal authority over the deceased’s finances.
According to Solicitors for the Elderly (SFE), banks, building societies and other financial institutions should adopt a standard approach to handing over the funds. This would reduce the risk of fraud and inheritance tax disputes.
Michael Culver, Chair of the board at Solicitors for the Elderly, said:
“Over the years, the limit has become higher and higher, and we’re alarmed to hear that many institutions are now releasing accounts with between £100,000 and £125,000, without a grant of probate.
“The system is now open to abuse. meaning anyone can claim to be an estate executor or administrator if a proof of status has not been requested or is an old will is shown.
“Large amounts of money could consequently end up falling into the hands of people who aren’t entitled to it; we could see issues occuring with inheritance tax claims – if there isn’t transparency around the value of money released then the declaration of estate size could be inaccurate; and it could also seriously impact lawyers’ work to carry out the deceased’s wishes.”
Currently banks and building societies have their own individual rules with regards to how they distribute a deceased customer’s finances, with many building societies revealing their common limit is £15,000.
UK Finance, the industry body for banks, says there are no guarantees that a deceased person’s funds will be released without probate, and cases are considered on merit.
A spokesperson for UK Finance, said:
“The banking and finance industry want to help executors and the bereaved wherever they can.
“In 2017, the then British Bankers’ Association (now UK Finance) and the Building Societies’ Association’s agreed bereavement principles which encourage firms to support the individual needs of the bereaved, to treat them with compassion and respect, and to release necessary payments to be made, including probate fees.
“This does not amount to a guarantee that funds will be released from a deceased’s bank account either without, or pending, a grant of probate – each case will always have to be considered on its merits.”
A spokesperson for the Building Societies Association said:
“For the vast majority of societies the maximum amount that they will pay out before probate ranges between £5,000 and £30,000.
“Early on in Covid-19 lockdown we reviewed the bereavement process with our members with a view to making it easier for bereaved families, particularly knowing that the usual approach of face to face support for the bereaved is not a generally viable option at present.
“In all of this we are working to retain human empathy and strike the right balance between delivering the best service to bereaved families balancing this with ensuring that the estate is distributed as the deceased person wishes.”