Is Probate Needed for Premium Bonds?
12 June 2019
Whether or not probate will be needed for premium bonds depends on whether the total value of assets the deceased held with National Savings and Investments exceeds £5,000. We explain the process for dealing with premium bonds after the owner dies.
What Are Premium Bonds?
Premium bonds are a product governed by National Savings and Investments (NS&I), which is essentially a savings account. However, rather than offer a consumer a guaranteed interest return for the monies invested, the interest funds a monthly prize draw for tax-free prizes. This means that if a consumer is selected to win a prize then it is exempt from both Income Tax and Capital Gains Tax.
There is no notice period or penalty for withdrawing and cashing in the premium bonds and the deceased's estate will continue to be eligible to win prizes for up to twelve months after they have died, as long as they have not been cashed in.
What Happens after The First Twelve Months have Elapsed?
On the first anniversary of the deceased's death, their estate will no longer be eligible to be entered into the monthly prize draw.
It is at this point that many people assume the premium bonds will be automatically cashed in and the monies (including any prizes won during the twelve month period) will be paid to the deceased's executors (or administrators if there's no will). Whilst this might happen in some cases (assuming the executors have already submitted the relevant NS&I closure forms) it will not happen for all estates.
When Won't the Encashed Monies Be Paid to the Executors?
During the first twelve months of the Estate administration, the Executor can complete an NS&I claim form. This will confirm their position as the executor of the estate, their eligibility to receive monies and the relevant account details.
The form will also ask the executor if they wish for the premium bonds to remain in the prize fund for the full twelve months or be encashed sooner. Assuming that the Executor completes and submits the claim form, requesting that the premium bonds remain in the prize fund for the full twelve months, then there may not be any further steps for them to take. On the first anniversary of the death, the premium bonds will be automatically cashed in and the monies (and prizes) will be paid into the Executors designated bank account.
It's important to note that NS&I will normally only pay monies to an Executor, using the claim form alone, if the total value of their products held by the deceased does not exceed £5,000. So, if the deceased's Estate held less than £5,000 worth of premium bonds, but they also held an NS&I Direct Saver Account or ISA, and the combined value exceeded £5,000, the encashed monies could not be paid to their Executor using just the claim form.
What to Do if the Total Value of NS&I Products Exceeds £5,000
If the total value of NS&I products held within a deceased's estate exceeds £5,000, then the executors must apply to the Probate Registry for a legal document. This is normally called a grant of probate (or a grant of letters of administration if there's no will)
If the estate contains other assets which also require a grant of probate, then it's likely that the executors will have already applied for this within the first twelve months of the deceased's death. In this case, the executors would only need to submit a sealed copy of the grant of probate with the NS&I claim form and the encashed premium bond monies would be paid to them at the end of the twelve month period.
The £5,000 threshold set by NS&I is relatively low, given that many high street banks have a higher limit for closing a deceased's account and pay out the closing balance to executors without the need for probate. For a full list of the main high street banks' probate thresholds, see Bank Limits for Probate.
If the grant of probate is only required for the premium bonds, then an application will need to be made to the Probate Registry to obtain this. It is possible for executors to apply for the grant of probate themselves, but if they are concerned about meeting the 12 month timeframe then they may wish to instruct a probate solicitor to help. They will then be able to apply for the grant of probate in good time and the premium bonds can then be encashed after twelve months.
Is There Another Way to Encash or Transfer Premium Bonds after Death?
Simply put, the answer is no.
Some assets can be held jointly with another person (such as a joint bank account) thereby enabling the assets to pass to the survivor owner when the other owner dies. Other assets can be nominated to a beneficiary outside of the estate (such as life insurance). In these examples, the assets can be administered without a grant of probate.
Premium bonds cannot be held jointly with another person. Additionally, premium bonds cannot be nominated to pass to a beneficiary when a person dies. Therefore, if the total value of NS&I products exceeds £5,000 there is no other option than to apply for a grant of probate.