What happens to a fixed-rate bond when someone dies?

Dealing with financial matters after someone passes away can feel overwhelming, especially when you’re unsure about their savings situation. If your loved one had a fixed-rate bond with Unity Mutual, you might be wondering what happens to it now, how it’s handled, and what you need to do next.

Don’t worry, we’re here to walk you through everything you need to know in a clear, simple way.

What is a fixed-rate bond?

A fixed-rate bond offers a fixed interest rate for a set period. This means the rate is agreed upfront and does not change during the term.

Once you lock your money in, the rate stays the same for the entire term, meaning your returns are guaranteed and don’t fluctuate with the market. Because these accounts don’t typically allow early withdrawals, they may be well-suited to savers who won’t need access to their funds during the term. 

Fixed-rate bonds may offer higher interest rates than easy-access accounts in return for keeping your money locked away, which guarantees more predictable returns over the term.

Types of fixed-rate bonds

Fixed-rate bonds come in different term lengths, allowing savers to choose how long they want to lock their money away. Some of the common options include 6-months, 1-year, and up to 5 years, generally as a max term. 

At Unity Mutual we offer a 2, 3 and 5 year bond*, and features include:

• Guaranteed returns regardless of interest rate changes
• Higher returns typically compared to easy-access accounts
• Financial certainty for the duration of the term on the return amount

*Terms and conditions apply to all our bonds.

Steps to manage a fixed-rate bond after death

While every situation is slightly different, and different providers may have different processes, these are the steps to follow when a Unity Mutual bond holder passes away.

1. Family member confirms the bondholder’s death

The first step to take is to let us know that the bond holder has died. This is usually done by a family member, executor, or solicitor.

Once we have been notified, we will explain what happens next and what information we need from you.

2. Gather the required documentation

To get things moving, we will need certain documents to confirm the death and establish who is entitled to the bond.

Once an original or certified copy of the death certificate is received, a Death Claim Declaration form will be sent for you to complete. This form will then need to be returned along with:

• The last will and testament
• Grant of Probate or Letters of Administration
• The original policy documents

If you’re unable to find the original policy documents, don’t worry, you can complete the Lost Policy Indemnity section on the Death Claim Declaration.

3. Check for nominated beneficiaries

What happens next depends on whether the bond is held on a single life or 2nd life (joint life) basis.

For 2nd life bonds: If one bond holder dies, the bond continues in the name of the surviving life assured. It will run until maturity or until the second life assured passes away. Alternatively, the surviving life assured can choose to withdraw the money early, but this will be subject to the same reduced interest rules that apply to early withdrawals during the bond’s term.

For single life bonds: If there is no second life assured, the bond becomes part of the deceased’s estate. The proceeds are paid out based on a percentage of the original investment, plus the reduced interest rate, in line with the bond’s terms.

4. Life cover protection

As shown in the table below, our fixed-rate bonds include an element of life cover for single life policies. This means that if the bond holder dies, the payout will include this added protection.

The final amount returned will depend on the bond’s specific terms and how far into the term it is, because the interest goes up every year that the capital is invested.

5. Distributing the funds

Once all the documents have been reviewed and the identity checks have been completed, the bond proceeds will be released. The funds are usually paid directly into a nominated bank account, either to the estate, executor, or beneficiary, depending on the circumstances.

Can you let a bond mature after the bondholder dies?

With many fixed-rate bonds, if the bond holder dies and there is no second life assured, the bond is released rather than continuing to maturity.

This means the funds are paid out once the required checks and paperwork have been completed. Once the bond holder has passed away, there isn’t the option to keep the bond running in their name anymore.

What happens to a bond if there is no will?

If the bondholder dies without a will in place, has no second life assured, and no solicitor is acting, the bond will be dealt with under the laws of intestacy.

Intestacy is the legal hierarchy of estate distribution when no will is present; the priority will vary based on the bond holder’s marital status and the living relatives the bondholder has.

We’re Here to Help

Dealing with finances after a bereavement can feel overwhelming, but you don’t have to handle it alone. If you have questions about a fixed-rate bond, need help understanding the paperwork, or need help explaining the process, support is always available. 

If you need to report the death of a Unity Mutual bond holder, everything you need can be found on our report a death page.  

Taking things one step at a time can make a big difference, and we’re here to guide you through the process whenever you need us.