Fundsmith

Fundsmith is a UK investment manager best known for a single, long-running global equity fund, and it sells its funds directly to individual investors rather than only through advisers or platforms. If you hold an account with it, or you are dealing with the account of someone who has died, most of what you need to know is about how the holding is registered and what paperwork releases it.

This page covers what Fundsmith offers, how to contact it, and then, in more detail, what happens when a Fundsmith investor dies. That last part matters because an investment account is not like a bank current account: the money cannot simply be handed over at a branch counter, and in most cases the firm needs a legal document before it can move anything.

What Fundsmith offers

Fundsmith's retail business is built around actively managed equity funds, sold to individual investors who deal with the firm directly. The two named funds are the Fundsmith Equity Fund and the Fundsmith Stewardship Fund. Both sit in the investing market rather than the savings market, which means their value can fall as well as rise and there is no fixed interest rate attached to them.

Because these are funds and not deposit accounts, the way you pay for them is different from a bank account. Fund managers charge an ongoing annual fee, taken as a percentage of the value of your holding, and that charge is deducted from the fund rather than billed to you separately. The effect is that the charge reduces the value of your investment over time rather than appearing as a line on a statement. Fundsmith publishes its own current charges on its website, and those figures change, so the place to check what a holding costs today is the firm's own documentation rather than any summary.

Funds of this kind are usually bought either directly from the manager or through a platform or adviser, and they can normally be held inside an ISA or a pension as well as in a plain investment account. Holding a fund inside an ISA changes the tax treatment of any growth and income, and holding it inside a pension changes when it can be accessed. The investing guide sets out how funds, platforms and accounts fit together, and the ISAs guide explains the tax wrappers.

Telling Fundsmith about a death: what happens first

The first practical step is to register the death, because the documents that come out of registration are what every institution, including Fundsmith, will ask for. Registration produces three things:

1. A certificate for burial or cremation, known as a Green Form²
2. A unique code for Tell Us Once²
3. A death certificate, which you have to pay for²

You can register at any register office, but using one in the area where the person died means you are given the documents you need that day².

Once the death is registered, Fundsmith can be told. The firm accepts an interim Death Certificate or Coroner's Certificate to register the death where the original Death Certificate has not yet been issued¹. That matters in practice, because a coroner's investigation can delay the full certificate for months, and an estate should not have to sit frozen while it waits.

There is also a service that notifies several institutions at once. The Death Notification Service tells a number of banks, building societies and financial institutions about a person's death in a single step, needs no account to use, and runs a helpline on 0333 207 6574 between 08:30 and 17:30, Monday to Friday excluding bank holidays³. It is not a substitute for contacting Fundsmith directly about an investment account, but it reduces the number of separate calls.

Money in the estate is not all treated the same way. If the person who died had money, it can usually be used to help pay for the funeral first⁴. Funeral expenses are often the highest priority claim on an estate except for some secured debts such as mortgages, which must be paid first⁵. Where the deceased left secured loans, those come ahead of funeral costs⁵.

Documents Fundsmith needs to register a death

Fundsmith's own requirements are set out in its bereavement guidance. The firm needs the death certificate, and where the original has not been issued it will take an interim Death Certificate or Coroner's Certificate instead¹. Original certificates are returned promptly by Royal Mail Special Delivery, so someone needs to be available to sign for the envelope¹.

Beyond the death certificate, the documents depend on how the account was held and how large the holding is.

Identity checks apply to the people doing the administering, not just to the deceased. Fundsmith says it will verify each representative's identity before processing any instruction to distribute the funds¹. That is standard practice across financial firms: NS&I, for example, says it is required by law to check identity and address when someone applies to invest or registers for its online and phone service, and may verify the identity of everyone named in an application under anti-money laundering legislation⁶. Expect every executor or administrator named on the grant to be checked, and expect the checks to add time.

Joint accounts: the investment passes to the surviving holder

Where a Fundsmith account was held in joint names, the firm removes the late client and the account continues in the name or names of the remaining holder or holders¹. The investment does not pass through the estate and does not wait for probate.

This mirrors how joint accounts work generally. MoneyHelper states that if an account holder passes away, the joint account will continue in the remaining names⁸. NS&I's terms for joint accounts say that on the death of one joint holder, the surviving holder gets ownership of the account⁹.

The practical consequence is that a surviving joint holder keeps access to the investment, and the holding is not counted among the assets that need a grant before they can be dealt with. That said, the death still has to be registered with the firm so the account records can be changed, and the surviving holder's own identity will need to be verified.

Joint holdings also interact with Inheritance Tax in a way that catches people out. The share of the asset belonging to the person who died still forms part of their estate for Inheritance Tax purposes, even though the account itself passes automatically to the survivor. Inheritance Tax is usually charged at 40% on the part of the estate above the threshold².

Sole accounts: what Fundsmith does once it is told

For a sole account, Fundsmith takes three steps as soon as it is notified¹:

• It stops correspondence to the deceased
• It cancels any active Direct Debits or Regular Withdrawal Facilities
• It sends a valuation as at the date of death, along with details of any distributions and cash balances held

That valuation is the figure the estate will use for Inheritance Tax reporting, so it is worth keeping.

The account is effectively frozen in the meantime. That reflects the general rule for sole accounts: no one will be able to touch the money until the estate is sorted out¹⁰. The same logic applies to other institutions. NS&I Direct Saver, for example, states that if the account holder, or the last surviving account holder of a joint account, dies, no more deposits can be accepted, the balance becomes part of the estate, and the account continues to earn interest⁹. Premium Bonds follow a similar pattern: the executor informs NS&I, after which the account is frozen and no more bonds can be bought¹¹.

Cancelling regular withdrawals matters more than it might sound. If a regular payment out of the account continues after death, it can create an overpayment that has to be recovered from the estate, and it complicates the valuation. Stopping Direct Debits prevents payments being taken from an account that is no longer operating normally.

Estates below the small estate threshold

Not every estate needs a full Grant of Representation. Fundsmith says that if the holding is below £20,000, a Small Estate Form, witnessed by a solicitor, may be used instead¹. That is a firm-specific threshold and it applies to the Fundsmith holding, not to the estate as a whole.

The thresholds used elsewhere are different, and it is easy to confuse them.

The result is that an estate can be above the probate small estate threshold and still qualify for Fundsmith's own small estate route, or the other way round. The two tests are separate, and the one that matters for releasing a Fundsmith holding is the firm's.

Grants from outside the UK and estates in Scotland

Fundsmith states plainly that Foreign Grants are not recognised in the UK¹. A grant of probate issued in another country will not release a UK holding on its own.

There is one route that can shorten the process. If the document was issued in a former or current Commonwealth country, it may be possible to have it resealed in the UK, which Fundsmith says is usually quicker than applying for a new Grant¹. Resealing is not available for every country, and it still requires an application.

In Scotland the terminology and the document are different. The Scottish equivalent of a grant of representation is a grant of confirmation¹⁵, and an application for Confirmation is made to the sheriff court⁵. Fundsmith must be listed on the Certificate of Confirmation for a Scottish estate¹. Where a will exists, the grant in England, Wales and Northern Ireland is a grant of probate; where there is no will, it is a grant of letters of administration¹⁵.

Funds from a deceased person's property may require a grant of probate before they can be released³. That is the general rule that sits behind Fundsmith's own requirements, and it is why the firm cannot simply act on a death certificate alone for a sole account.

Paying Inheritance Tax directly from a Fundsmith holding

Fundsmith can pay some or all of the funds directly to HMRC to cover an Inheritance Tax bill, provided it holds the original Death Certificate¹. Once it receives a completed IHT423 form, it can make the payment directly to HMRC¹.

The IHT423 is the route used to pay Inheritance Tax from a bank or building society account, and the same mechanism is used for investment holdings. HMRC's guidance notes that cash funds held within a share or investment portfolio can sometimes be released directly to HMRC to pay the tax, and that the person dealing with the estate should contact the stockbroker or fund manager¹⁷. Payment at a branch can be made by cash or cheque, and where the payment comes from a joint account held with the deceased, it can be claimed back from the estate¹⁸.

Timing is the pressure point. You will normally have to start paying Inheritance Tax before probate is granted¹⁹. If the estate owes Inheritance Tax, its value must be reported within one year using form IHT400¹⁹. Where Inheritance Tax is due or full details are needed, HMRC uses form IHT400²⁰.

There is relief if the money is not immediately available. Inheritance Tax can be paid in instalments if at least 20% of the total the estate owes is on assets that qualify for payment by instalments, or if paying it in one lump sum would cause financial difficulties²¹. You must say on form IHT400 that you want to pay in instalments²¹, and the full tax and interest can be paid off at any time by writing to HMRC asking for a final assessment²¹.

Where funds are tied up, a grant on credit is possible. HMRC will ask for a signed undertaking, a legally binding promise to pay the Inheritance Tax within an agreed timescale¹⁷, and you must tell HMRC the maximum amount you can pay towards the tax before the grant can be issued¹⁷. The application goes to HMRC with a signed and completed form IHT400 and any supplementary pages or supporting documents, plus form IHT421 in Northern Ireland or Confirmation form C1 in Scotland, and a letter headed 'Grants on credit' confirming you cannot release funds from the estate and stating the maximum you can pay¹⁷.

Keep, transfer or sell: choices for the personal representative

Once Fundsmith has verified the personal representatives, the investment can stay with the firm, be transferred, or be sold and the proceeds paid to the personal representative¹. Those are the three routes, and the choice belongs to the people administering the estate.

For an ISA holding, a transfer is done on the account investor's instructions, with the account or agreed parts of it transferred to another account manager in accordance with the ISA regulations²².

The choice is not purely financial. Selling during a period when markets are low locks in that value for the estate, while holding on means the beneficiaries carry the investment risk. Transferring keeps the investment intact but requires the receiving provider to accept it.

You do not usually owe any tax on an inheritance at the time you inherit it²³. That does not mean the estate pays nothing: Inheritance Tax is a charge on the estate, and it is usually charged at 40% on the part of the estate above the threshold². Where the estate is worth £650,000 or less and any unused threshold is being transferred from a spouse or civil partner who died first, it may qualify as an excepted estate for deaths on or after 1 January 2022²⁴.

Inherited ISA allowance for a surviving spouse or civil partner

Where the deceased held an ISA, Fundsmith notes that an extra ISA allowance is available for a surviving spouse or civil partner¹. The allowance is an addition to the survivor's own annual ISA subscription limit, and it exists so that ISA savings can be passed on without losing their tax-free status.

The mechanism is used across the ISA market. NS&I's Direct ISA states that you can now inherit an additional ISA allowance if your spouse or civil partner dies, up to the value of their ISA at the date of death²⁵. The ISAs guide explains how the allowance works alongside ordinary ISA subscriptions.

Two conditions matter in practice. The allowance applies to a spouse or civil partner, not to other beneficiaries, and it is based on the value of the ISA at the date of death. Where the ISA holding is being transferred rather than sold, the transfer has to be carried out under the ISA transfer rules, on the instruction of the account investor²².

How Fundsmith is regulated and where to complain

Fundsmith is authorised and regulated by the Financial Conduct Authority, and its funds are sold to retail investors in the UK. The firm's own bereavement guidance is the starting point for anything to do with a deceased client's account¹.

If something goes wrong, the first step is Fundsmith's own complaints procedure. If that does not resolve it, the Financial Ombudsman Service can look at complaints about businesses regulated by the Financial Conduct Authority, including some pension schemes and their services²⁶. Before complaining, you can check that the firm is regulated using the FCA's Firm Checker²⁷. Where a complaint is about poor service, the firm will refer it to the Financial Ombudsman Service²⁷.

The ombudsman's scope has limits. It can consider complaints from trusts with a net asset value of less than £5 million²⁸. Where a complaint concerns a claims management company rather than the investment firm itself, for example about the results of a claim or the fees charged, the Financial Ombudsman Service can also be used²⁷.

Investment protection works differently from deposit protection. The Financial Services Compensation Scheme covers certain claims, and where a claim relates to unsuitable pension transfer advice, the route is to complain to the adviser first if it is still trading, then to the Financial Ombudsman Service, with the FSCS handling claims where the adviser has failed³⁰. For deposit-taking institutions, the position is different again, and the consumer protection guide sets out how the compensation schemes and the ombudsman fit together.