How to Include Bonds in a Will

Including bonds in a will requires understanding how different types of bonds are treated under English and Welsh law, how they form part of your estate, and how executors administer them after death. Bonds are financial assets that can form part of someone's estate and, in many cases, will influence inheritance tax liabilities. This guide explains the key legal principles, practical steps for including bonds in a will, how executors handle them after death, and common issues that arise in estate administration.

What Are Bonds and How Do They Feature in Estate Planning?

Bonds are fixed‑income financial instruments issued by governments, companies or other entities. They can include UK government bonds (gilts), corporate bonds, investment bonds, and savings products like Premium Bonds. Bonds differ from bank accounts in that they represent an investment with a return over time rather than simple cash savings.

In estate planning terms, bonds held by an individual at death generally form part of the estate, subject to:

• how they are owned (sole or joint ownership),
• whether they have designated beneficiaries,
• whether they have been placed in a trust before death.

A will is a legal document specifying how you want your estate distributed on your death. It identifies your beneficiaries, appoints executors, and sets out instructions for distributing your assets, including financial investments such as bonds.

Which Bonds May Be Included in Your Estate?

Different types of bonds that might feature in wills include:

Premium Bonds and Savings Bonds
These are investments issued by National Savings and Investments (NS&I) or similar institutions. They are often included in estate accounts and must be notified to the executor after death.

Investment Bonds
These are life assurance‑based investment products where a single premium is invested and growth occurs on a pooled basis. They usually form part of the estate unless they have been assigned to a trust or gifted during life.

Government and Corporate Bonds
Gilts and corporate bonds held directly or within investment portfolios count as investments in estate accounts.

Some bonds may be held within tax‑efficient wrappers such as ISAs. Although ISAs shelter income and gains during life, the value of underlying investments, including bonds, forms part of the estate for inheritance tax purposes.

How Bonds Form Part of the Estate

In England and Wales, when someone dies:

• all assets solely owned by them, including bonds and investments, become part of their estate;
• jointly owned assets may pass automatically to the surviving owner by rights of survivorship and do not form part of the estate for distribution under the will;
• any asset with a beneficiary nomination-including certain trust arrangements-may bypass the will and pass outside the estate.

The executor named in the will must identify all bonds and investments and include their values in the estate inventory when applying for probate. Probate is the legal authority granted by the probate registry confirming the executor's power to administer the estate.

Including Bonds in Your Will: Practical Steps

1. Make an Asset Inventory

Before drafting a will, prepare a comprehensive list of all financial assets, including:

• the type of bond (premium bonds, investment bonds, gilts, corporate bonds),
• the issuer's details,
• approximate values and account information,
• whether they are held jointly or in trust.

This list assists executors and avoids assets being overlooked in the estate.

2. Decide How You Want Bonds Distributed

In your will you can:

• Specify specific gifts of particular bonds or bond values to named beneficiaries, or
• Leave bonds to form part of the residuary estate, meaning they are distributed according to the residuary clause if not specifically gifted.

Avoid including granular account numbers in the will as these details change and are not recommended in legal documents like wills.

3. Consider Trust Planning

For certain bonds, especially investment bonds, you may plan ahead by placing them in a family trust or arranging lifetime gifts:

• Trusts: Placing bonds in a trust can, in some circumstances, remove them from your estate for inheritance tax purposes, but each trust type has legal and tax implications.
• Lifetime Gifts: You may transfer bonds to beneficiaries while alive. If you survive seven years after the gift, they may fall outside your estate for inheritance tax.

Both trust arrangements and lifetime gifts require careful planning and legal advice.

4. Update Regularly

Review your will periodically, especially when you acquire, sell or transfer bonds, or when there are changes in your family circumstances (marriage, divorce, births, deaths).

Once You Die: What Executors Must Do

An executor's responsibilities regarding bonds include:

notification to providers
Executors should notify bond issuers of the death, typically providing a death certificate, probate (if required), and their authority to act.

valuation for inheritance tax
Bond values at the date of death must be included in the inheritance tax return (IHT400). For UK government securities and similar instruments, HM Revenue & Customs (HMRC) guidance requires separate valuation schedules that include bonds and securities.

probate and distribution
If the total value of an estate exceeds provider thresholds, executors must obtain a grant of probate before cashing in bonds or assigning them to beneficiaries as per the will.

handling Premium Bonds
If the deceased held Premium Bonds, NS&I generally allows bonds to remain in prize draws for up to 12 months after death if notified, and unclaimed prizes can be paid to the estate.

Tax and Estate Considerations

Inheritance Tax (IHT)
Most bonds form part of the value of your estate for inheritance tax purposes. If the total estate exceeds the nil‑rate band (£325,000 at present), IHT may be payable at 40% on the value above the threshold unless exemptions or reliefs apply.

Premium Bonds and IHT
Premium Bonds themselves are included in the estate's value for IHT, although prizes won before death are not part of the estate and remain tax‑free income to the individual.

Trusts and Bonds
Holding bonds in an appropriate trust can alter their treatment for IHT and estate administration, but trustees' legal duties and tax rules must be considered carefully.

Common Questions

Can I list bond account numbers in my will?
It is not recommended to include detailed account numbers in your will. Instead, keep an up‑to‑date separate list of assets for reference by your executors.

Do bonds held jointly pass outside a will?
Yes. Bonds held in joint names often pass automatically to the surviving owner under rights of survivorship, not through your will.

What if bonds are held in an ISA?
The underlying value of bonds held within an ISA forms part of your estate for inheritance tax purposes, even though the tax benefits applied during your lifetime.

Can I gift bonds before death to reduce IHT?
Yes. Gifts of bonds made more than seven years before death can fall outside your estate for IHT, subject to conditions.

Key Takeaways

Bonds are financial assets that, like savings and investments, usually form part of your estate in England and Wales. A will should not include account numbers but may specify how you want bonds or their value distributed to beneficiaries. Executors must identify, value and administer bonds as part of estate administration, often applying for probate before accessing funds. Planning steps such as asset inventories, trusts, and lifetime gifts can contribute to effective estate management and inheritance tax planning.