What’s the Probate Limit for Premium Bonds?
14 November 2019
Premium Bonds are held with National Savings & Investments (NS&I) and the Probate limit for assets held with NS&I is currently £5,000. This means that if the deceased owned over £5,000 worth of Premium Bonds, or if they owned Premium Bonds and another NS&I account with a combined worth of more than £5,000, then Probate will be needed.
If someone owned Premium Bonds at the time of their death, then the value of these will form part of their overall Estate. The value of Premium Bonds will need to be included in the Estate's valuation for Inheritance Tax purposes. The Premium Bonds themselves will need to be administered in line with the terms of the Will (if there is one) or the Rules of Intestacy (if there isn't).
The maximum value of Premium Bonds that any individual can own is £50,000. So Premium Bonds can be a significant Estate asset, however it's more common for people to own a lower amount than this.
What Happens if Premium Bonds Exceed the Probate Limit?
If more than £5,000 worth of Premium Bonds (and other assets with NS&I) were owned at the time of death, then a Grant of Representation will be needed to deal with these. This is a legal document which grants a named person with legal authority to administer a deceased person's financial and legal affairs. This document is called a Grant of Probate if there is a Will or a Grant of Letters of Administration if there isn't, and an application will need to be made to the Probate Registry to obtain this. This is one of the Executor or Administrator's duties.
Once the Grant of Representation has been received, this will need to be passed on to NS&I. There are a couple of ways in which the Premium Bonds can then be dealt with during Probate. They can either be sold (or 'encashed') straight away, or they can be kept in the prize draw for up to a year after the death, and then be paid out. If any prizes are won during this period, these can be claimed by the Executor / Administrator of the Estate or by a nominated Beneficiary.
Once the Premium Bonds have been encashed, this money will go into the Estate and be distributed to the Beneficiaries in line with the terms of the Will or the Rules of Intestacy.
Unlike many other assets, it's not possible for Premium Bonds to be transferred directly to a Beneficiary. This means that if a Beneficiary wants to keep their entitlement in Premium Bonds, they will need to be sold, the proceeds distributed to the Beneficiary, and the Beneficiary can then buy Premium Bonds in their own name through NS&I. This is the only way that the Premium Bonds can change into the name of the Beneficiary.
Furthermore, it's not possible to own Premium Bonds jointly with another person. This means that they cannot pass by survivorship into the name of a joint owner as they will always be owned in one person's sole name.
Support with Administering Premium Bonds during Probate
If you are responsible for administering an Estate that contains Premium Bonds and you aren't sure where to start, speak to our Probate Advisors for free initial advice.
With our Probate Complete Service, we can take full responsibility for dealing with the legal, tax and administrative work that Estate administration entails. This includes locating all assets, valuing the Estate, calculating and paying Inheritance Tax, Applying for the Grant of Representation, selling or transferring assets (including premium bonds), settling liabilities and distributing the Estate to the Beneficiaries.