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What happens if a premium bond holder dies?

Premium Bonds are a type of savings account offered by National Savings and Investments (NS&I) in the UK. When someone dies holding Premium Bonds, there is a specific process that their loved ones and executors need to follow to access the bonds and any winnings accrued. In this article, we will walk through what Premium Bonds are, what happens when a holder dies, how to inform NS&I of the death, claiming the bonds and winnings, taxes and fees to be aware of, and any other key information for executors and family members.

What are Premium Bonds?

Premium Bonds are essentially a lottery-based savings account offered by NS&I, which is backed by Her Majesty’s Treasury. Here’s a quick overview of how Premium Bonds work:

– When you purchase Premium Bonds, you are buying a chance to win various cash prizes each month. The minimum bond purchase is £25.

– Instead of earning interest, each £1 bond number is entered into a monthly prize draw. The prize fund rate is currently 1.40%.

– Prizes range from £25 up to £1 million. The odds of any one bond number winning are 24,500 to 1.

– You can cash in your Premium Bonds at any time. Your original investment is always returned, with no interest. Any winnings earned are also returned.

– Premium Bonds are considered very safe, as they are backed by the Treasury. The investment is also covered by the FSCS up to £85,000.

So in summary, Premium Bonds offer the chance to win cash prizes instead of earning regular interest. They are very popular in the UK as an alternative savings option.

What happens when a Premium Bond holder dies?

When a Premium Bond holder passes away, their bonds and any winnings form part of their estate. Here’s an overview of the key things that will happen:

– NS&I needs to be formally notified of the bond holder’s death (more details below).

– The deceased’s Premium Bonds and any unpaid winnings will be frozen. Access to manage or cash in the bonds will also be suspended.

– The bonds and winnings will eventually be paid out to the deceased’s executors or administrators once the required probate/confirmation paperwork is provided.

– If the total value of the Premium Bonds and uncashed winnings is under £5,000, NS&I may be able to release the funds without a grant of probate in some circumstances.

– The bonds and winnings form part of the deceased’s estate and will be distributed according to their will or the laws of intestacy if no will exists.

– Taxes and fees may need to be paid on any interest/winnings before the bonds can be cashed in by beneficiaries.

So in the event of a bond holder’s death, NS&I needs to be informed so the funds can be correctly handled while the estate is settled. The Premium Bonds and winnings will ultimately be passed on to the chosen beneficiaries.

Informing NS&I of a bond holder’s death

The first step when a Premium Bond holder dies is informing NS&I. This ensures the bonds and winnings are secured and access is restricted while probate progresses.

To notify NS&I of a bond holder’s death, you need to contact them via phone, post or using their online service.

You will need to provide:

– The bond holder’s personal details – full name, address, Premium Bond holder’s number

– The date of death

– Your details as the executor, next of kin or person handling the estate

– An original copy of the death certificate

NS&I will then suspend the account. You will receive confirmation in writing when this has been processed.

The bond holder’s name and details will also be removed from future prize draws. Winning cheques or direct credits dated after the date of death will not be honoured.

It is important to inform NS&I as soon as possible after the bond holder’s death. This ensures the funds are protected and prevents fraudulent encashment of prizes.

Claiming the bonds and winnings as an executor

Once NS&I has been notified of the death, the Premium Bonds and any winnings or interest accrued will eventually be released to the deceased’s executors or administrators.

Here is the general process to claim the funds:

If there is a will – Apply for probate

– Locate the original will and death certificate. You will need several copies of each.

– Register the death using form BD8. This is required for probate and to notify government agencies like HMRC.

– Complete form PA1 and swear an oath to apply for the probate grant. This confirms you as executor and gives you legal authority over the estate.

– Send probate form PA1, death certificate copies, and the fee to the probate registry. The fee is £273 for estates over £5,000.

– You will receive a sealed grant of probate in 4-8 weeks. Send this to NS&I to claim the Premium Bonds and winnings.

If no will – Apply for letters of administration

– Ensure there is definitely no will using the find a will service.

– Register the death and notify government agencies.

– Complete form PA1 (using the relevant section for those with no will) and pay the fee.

– Send the form, death certificate and fee. You will receive confirmation as administrator in 4-8 weeks.

– Send the letters of administration to NS&I as proof to claim the funds.

NS&I will only release bonds and winnings directly to valid executors/administrators. This protects against fraudulent claims.

Claiming funds under the small estates process

If the total Premium Bond funds and unpaid winnings are below £5,000, NS&I may release money without requiring a grant of probate. This is known as the small estates process.

To use this simpler procedure:

– Complete a small estates declaration form. This confirms there is no will and your relationship as next of kin.

– Provide a death certificate, evidence of your relationship to the deceased, ID, and proof of address.

– NS&I will then pay out bonds and winnings up to £5,000 to you directly without probate.

– Anything above £5,000 requires the standard probate grant or letters of administration before NS&I will release funds.

Using the small estates process allows faster access to smaller funds without needing to apply for probate. This simpler inheritance procedure saves time and legal costs for small, uncomplicated estates.

How long does the process take?

The timeframes involved in settling a Premium Bond holder’s estate can vary:

– Informing NS&I of death – can be done immediately with proof. Access to the funds is then suspended.

– Probate application – usually takes 4-8 weeks for the grant to be issued once forms are submitted.

– NS&I claims process – can take 2-3 weeks once probate paperwork is provided to NS&I.

– Total typical time – around 2-3 months with probate, but can take longer for more complex estates.

– Small estates – the small claims process removes probate delays, allowing next of kin to claim funds in a few weeks.

Delays may happen if:

– There are any disputes over the estate or vagueness in the instructions of the will.

– The estate is large or complex e.g. many assets, property and investments to unwind.

– Death duties and inheritance taxes apply e.g. on large estates or assets held abroad.

– NS&I require any additional information before releasing the funds.

Touching base regularly with all parties can help minimise any hold ups in the process. Using a probate specialist solicitor can also smooth the process for larger or disputed estates.

Fees to be aware of when encashing Premium Bonds

There are a few costs and fees to factor in when eventually cashing in a deceased’s Premium Bonds:

Probate application fees

– England & Wales – £273 probate fee if estate value exceeds £5,000

– Northern Ireland – £261 for grant of probate

– Scotland – £250-500 is typical for confirmation, depending on estate size and complexity

Death duties

Inheritance tax may need to be paid if the estate exceeds certain thresholds:

– UK estates worth over £325,000 – 40% inheritance tax applies on the excess

– Reduced rates for leaving assets to a spouse – threshold is £650,000

Tax on Premium Bond winnings

– Winnings are tax-free while the account holder is alive

– Interest accrued after death is taxable – winnings are treated as savings interest

– Tax at the savings rate (currently 20%) needs to be paid before funds are released

– Any winnings already paid are exempt from the deduction

Understanding these costs ensures executors set aside enough funds to settle fees before bonds are cashed. An accountant can also assist in calculating any tax obligations.

Can Premium Bonds be transferred to a surviving spouse or child without probate?

Premium Bonds cannot be transferred to another person without formally going through probate, even to a surviving spouse or child.

The probate grant confirms the executor’s rights to manage the estate. Without this, NS&I cannot legally give access or transfer bond ownership to anyone else.

However, once probate is granted, the deceased’s Premium Bonds can be transferred or cashed in by the executor and assets distributed as per the inheritance instructions:

– A spouse may inherit all or part of the Premium Bond investment.

– The bonds can be cashed in and proceeds used as per the will’s directives e.g. dividing between children.

– Specific bond holdings can be transferred to named beneficiaries where desired.

– Jointly held bonds will automatically pass to the surviving bond holder.

While probate takes time, it ensures the proper legal transfer of assets to heirs and gives executors the authority to act on behalf of the estate.

Other important points for executors about a bond holder’s death

Some other helpful things for executors and next of kin to be aware of when a Premium Bond holder dies:

– You should locate all bond certificates and prize warrants to return to NS&I – this ensures no fraudulent encashment.

– Make a note of any bond details like holder’s number and value of holdings to assist with your records.

– The death can affect benefits claims – notify agencies like DWP if the deceased was receiving any social security payments.

– Register the death with HMRC and pay any inheritance tax due before funds can be released.

– Write to utility companies and banks to close any accounts in the deceased’s name and settle balances.

– Redirect any post for the deceased to prevent identity theft. Royal Mail offers a free service for this.

– Utilise a probate genealogist if you have trouble locating beneficiaries or identifying next of kin.

– Seek advice from a solicitor on applying for probate if it is a very large or contentious estate.

– NS&I can destroy paper bond certificates once holdings are cashed in – just advise them in writing if desired.

Settling a loved one’s estate can be difficult, so take advantage of professional support and guidance where needed.

Frequently Asked Questions

How quickly does NS&I need to be informed if a Premium Bond holder dies?

It is advisable to notify NS&I as soon as possible after a bond holder’s death. Typically within 2-4 weeks. This ensures accounts are suspended before prizes or bonds can be fraudulently claimed.

What details do NS&I need about the deceased Premium Bond holder?

NS&I will need the full name and contact details of the deceased, their Premium Bond holder’s number, date of death, original death certificate, and the details of next of kin or the executor handling the estate.

Can a surviving spouse continue to collect Premium Bond prizes after a holder dies?

No, winnings will be suspended once NS&I is informed of the bond holder’s death. Prizes after the death date cannot be honoured or collected by anyone.

How do I find out if someone left Premium Bonds when they died?

NS&I can do a deceased estate search for £25 per name. This checks their database for any Premium Bond holdings not yet notified. Or ask relatives if they know of any NS&I investments held.

Are Premium Bonds considered part of the estate for inheritance tax?

Yes, the total value of Premium Bond holdings and any interest or winnings accrued will form part of the estate value for inheritance tax purposes after any debts/liabilities are deducted.

Conclusion

Dealing with Premium Bonds after a death involves notifying NS&I, suspending payouts, and awaiting probate before funds can be released to executors or beneficiaries. While the process can take a few months, it enables the proper transfer of assets and ensures protection against fraudulent claims.

Seeking professional assistance from probate specialists, lawyers and accountants can be worthwhile for larger or complex estates. Understanding the order of procedures, tax implications, fees involved and NS&I’s specific requirements allows Premium Bond holdings and winnings to be settled correctly after a holder’s death.

Key Steps for Executors

– Inform NS&I of the death in writing with a certified copy of the death certificate. Accounts will then be suspended.

– Apply for probate or letters of administration to be legally confirmed as executor/administrator.

– Send the sealed grant of probate/confirmation to NS&I so bonds and winnings can be released.

– Pay any tax on interest/winnings accrued and inheritance tax if the estate exceeds the threshold.

– Distribute the funds according to the will or laws of intestacy once received.

– Use the NS&I small estates process for holdings under £5,000.

– Seek professional support from probate specialists, solicitors and accountants to ease the process.