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Debt After Death

By: J.A.J Aaronson - Updated: 18 Jun 2017 | comments*Discuss
 
Debt Death Estate Creditors Insolvency

The level of consumer debt in Britain has exceeded £1 trillion. This is formed in large part, of increasingly large mortgages, precipitated both by increased house prices and relatively low interest rates. In this climate in which borrowing is de rigueur, it is all too common for people to accumulate debt with little or no thought for the future. Indeed, a startlingly large proportion of people assume that, when you die, your debts will be written off. This is, of course, not the case. In fact, the death of the debtor has little effect on the debt itself – it must still be paid back by one means or another.

The Estate

When an individual dies, all of their assets (including money, property, shares and insurance payouts) are bundled together and valued as one. This collection is known as the person’s estate. When an individual makes a will, they will name someone to take charge of their affairs after their death. This person is called an ‘executor’. If, on the other hand, they have Died Intestate (that is, without a will), then an ‘administrator’ is appointed to carry out the same duties. The first task facing this individual, after having valued the estate, is to begin to pay off any outstanding debts from the estate.

In paying off these outstanding debts, the executor or administrator must ensure that they repay the deceased individual’s creditors in a certain order: Mortgages and secured personal loans; funeral and admin costs; inheritance tax then utility bills, credit cards and other taxes.

It is often thought that a surviving spouse or civil partner will automatically ‘inherit’ the deceased individual’s debts, but this is not necessarily the case. Nothing will be paid to the beneficiaries of the will until all of the debts have been cleared, but there are only certain circumstances in which a partner would be liable for these debts. The most common of these is if you were to have a loan in a joint name (that is, your partner’s and your own), or if you acted as a guarantor against a loan taken out in the deceased person’s name. In these circumstances, the responsibility for paying back the money is passed to you.

Housing

If there is not enough money in the estate to pay off the outstanding debts, and you jointly owned a house with the deceased individual, there is a chance that you may be forced into selling the property in order to satisfy the creditors. Your course of action in these circumstances depends on the legal position of your tenancy; if you were tenants in common (that is, each of you owned a specific share in the property) then debts will first be paid from the deceased person’s portion of the house.

However, you are likely to have to negotiate with the creditors in order to avoid the forced sale of your portion. If, on the other hand, you were joint tenants (that is, you owned the entire property together), the deceased person’s portion will pass directly to you. However, creditors can still attempt to force the sale of the property through an Insolvency Administration Order, and so you would almost certainly be best off trying to negotiate a payment plan with those who are owed money.

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Apple - Your Question:
Hie guys am new on here need some help please. My mom passed away in 2011 and I'm administrator of her estate I've received a tax refund cheque how do I go about this as I'm clue less

Our Response:
What is the tax refund for?
TheWillExpert - 20-Jun-17 @ 2:00 PM
Hieguys am new on here need some help please. My mom passed away in 2011 and I'm administrator of her estate I've received a tax refund cheque how do I go about this as I'm clue less
Apple - 18-Jun-17 @ 7:53 PM
Am I liable for my dead husbands tax bill
Booboo - 10-May-17 @ 7:05 PM
My husband died suddenly in April 2015 leaving an outstanding tax and vat bill amounting to 23,000 he had a sole traders business which has now been taken over by my stepson without my permission am I liable for paying the debt as hmrc are telling me I will be looking at s custodial sentence
Booboo - 10-May-17 @ 7:04 PM
I have just found out that my mums funeral bill was never paid off fully in 2007 there is an outstanding balance of £1,350 we have had no correspondence from the funeral directors at all , are we still liable for this after nearly 10 years ? Could we pay it off in instalments if we are as I have no savings I'm on long term sick thanks any advice appreciated
Sal - 29-Apr-17 @ 5:39 AM
My sister died leaving masses of debt, she was also a hoarder so on entering her property it was a massive job to find any paperwork in the first place and then contact her many creditors which i did my best to do.Debts included many that were old and some seemed to have been sold on which made the process even harder, i did what i could and didnt hear anything else in the 9 months it took to sell the property. We cleaned and made the property saleable and the property has now been sold and it seems that only now we are being contacted by these creditors some that we are aware of some that we aren't.We didn't place a newspaper advert in the gazzet mostly down the many financial costs we were already incurring.We are now in a process of settling some of the debt and are aware of who gets priority but my question is how much time do we give before we can start to distribute the estate if there is anything left, i have been told that any debts that are older than 6 years cannot be claimed for and that any company that writes to me need to give me full details of the debt but im not sure who true this is im also unsure of how long i need to wait for these companies to contact me? any information and advice would be much appreciated.
chris - 22-Apr-17 @ 3:15 PM
late brother left credit card debts - no will, no estate, I informed credit card companies and was informed accounts closed.compensation money from a mis-sold investment has come in 18 months after his death - do I have to inform these credit card companies now?
cool - 19-Apr-17 @ 8:54 AM
Hen270466 - Your Question:
HiMy mother died suddenly. No will, no money and now being chased by HRMC for a debt of 28 k over underpayment of taxes from 2012 to 2015.My dad is an OAP and living in the same house which is mortgage free. He has no funds to pay this unless he sells the house and they have separate bank accounts.Is he liable for this taxes if so how can this be remedied without him paying. Please note that mom ignored the her tax liabilities all there years as we have only found out.Any advise will be truly appreciated.

Our Response:
When someone dies, their debts should be paid from their estate. Your father will need to check what type of "ownership" the property is registered as having (with the Land Registry). If it was registered with your mother and father as "joint tenants" they both owned the whole home, so the surviving party (your father) automatically becomes sole owner. If the property was registed as "tenants in common" your mother's share of the property may form part of her estate. If the latter is the case, the HMRC debts might be payable from this part of her esate. In general if there is nothing in the deceased's estate to pay the debts, they will be written off. Your father can't be held personally liable for them. A solicitor will be able to advise on this.
TheWillExpert - 18-Apr-17 @ 11:32 AM
Hi My mother died suddenly. No will, no money and now being chased by HRMC for a debt of 28 k over underpayment of taxes from 2012 to 2015. My dad is an OAP and living in the same house which is mortgage free. He has no funds to pay this unless he sells the house and they have separate bank accounts. Is he liable for this taxes if so how can this be remedied without him paying. Please note that mom ignored the her tax liabilities all there years as we have only found out. Any advise will be truly appreciated .
Hen270466 - 15-Apr-17 @ 4:24 PM
Kate - Your Question:
My mother in law passed away 16 months ago. We have settled her estate and distributed the proceeds among the family.We have just recieved a letter from a care company for an outstanding bill. We did let them know she'd died at the time. But they have never sent an invoice. Until now.Do they have a legal claim to make us repay the debt?

Our Response:
We assume the executors were sufficiently thorough in their investigations of any outstanding debt, including checking your mother in law's paperwork, asking her friends and other family member (plus possibly advertising for creditors to come forward via an annoucement of the death in local papers and the London Gazette). If so and no other creditors came forward, you should be protected against any claims and can just tell them that the estate has been settled and there are no funds available to pay.
TheWillExpert - 10-Apr-17 @ 2:05 PM
Is it better to secure a loan against business assests or my home for inheritance tax purposes
Kates - 9-Apr-17 @ 8:47 AM
My mother in law passed away 16 months ago. We have settled her estate and distributed the proceeds among the family. We have just recieved a letter from a care company for an outstanding bill. We did let them know she'd died at the time. But they have never sent an invoice. Until now. Do they have a legal claim to make us repay the debt?
Kate - 7-Apr-17 @ 4:46 PM
Del10 - Your Question:
My parents both died 3 months apart from each other last year.I have a sister and over the years my parents have loaned me £27,000.just sold my parents house ( no mortgage) do I have to pay my sister any money , ?

Our Response:
Unless this was documented it's unlikely you can be forced to pay it back. Can you come to some agreement with your sister over this.
TheWillExpert - 6-Apr-17 @ 1:59 PM
My parents both died 3 months apart from each other last year ..I have a sister and over the years my parents have loaned me £27,000 .just sold my parents house ( no mortgage) do I have to pay my sister any money , ?
Del10 - 5-Apr-17 @ 6:09 PM
Di - Your Question:
My daughter in law's father died over 2 1/2 years ago. He did not leave a will and had nothing of value.She did not benefit or expect anything when he died. He lived in a council flat and received housing benefit. His furniture was all very old and was taken to the tip except for an ancent tv that was given to his brother.The local council has now sent her a letter saying that he owed council tax and if she doesn't pay it within a week she will be taken to court and incur further costs. This has come out of the blue. Surely she can't be expected to pay this.

Our Response:
You are not responsible for this debt. Just tell the Council that your fatherhas died and did not leave sufficient assets to pay the rent arrears. If you have any paper work or evidence, send that too. They can't take you to court unless they can prove that there were assets in the "estate" to pay for the outstanding rent.
TheWillExpert - 22-Mar-17 @ 10:35 AM
My daughter in law's father died over 2 1/2 years ago. He did not leave a will and had nothing of value.She did not benefit or expect anything when he died.He lived in a council flat and received housing benefit. His furniture was all very old and was taken to the tip except for an ancent tv that was given to his brother. The local council has now sent her a letter saying that he owed council tax and if she doesn't pay it within a week she will be taken to court and incur further costs. This has come out of the blue. Surely she can't be expected to pay this.
Di - 19-Mar-17 @ 9:08 AM
my grandparents are leaving a house which is a business upstairs (renting rooms to tenants x5) and downstairs is a separate flat in which they live to myself and my sister my sisters name has just been out onto the papers to say that she is part home owner and I will be added at a later date.....will we still have to pay any inheritance tax on the house even if my sister is already part of the home owner, thank you in advance for your help we are so confused about the best thing to do but no amount of solicitors or accountants can give good solid advice!!!
kerry - 12-Mar-17 @ 11:01 PM
My Mum recently passed away with a huge amount of debt on credit cards, store cards and an overdraft Funeral costs have been paid using an over 50's insurance plan she had taken out. We are due 2 payments (hopefully) from her pensions. There is no other estate than that. My Mum had a will and I am the executor. The question I have is when I informed her bank of her death they said that she had insurance on the credit card but the overdraft would need to be paid. A friend asked a friend who works for said bank and she said that we could refuse to pay the overdraft as it is below the amountthey can wipe without question but will obviously try to get us to pay it and I wondered if this was correct?I had also informed one of her other credit cards and they said the debt was wiped but that the company would still try and get me to pay the debt but I was to refuse and there would be nothing they could do about it which is why I'm wondering about the overdraft.
WW - 24-Jan-17 @ 5:11 AM
My partners father died recently. He had a Spanish property which was mortgaged by a UK lender. The property is in negative equity and have said they will claim against the remainder of the UK estate, effectively clearing all his savings, pensions etc. We would accept them repossessing the property but the solicitor thinks they have a right to the rest of the estate and is advising to hand over the whole of the UK estate in settlement. Does this sound right?
Haslemere - 11-Jan-17 @ 9:04 PM
My mother recently passed away leaving my Stepfather, my sister and I equal shares in her half of a Spanish property. Unfortunately there remains a 50k mortgage on the property in Spain. Her assets in England (cash) are more than enough to cover the Spanish mortgage, however my Step father insists that all 3 of us are responsible for the remaining mortgage. Is this true or should my mothers English assets (cash) cover her half of the mortgage?
Nickj - 11-Jan-17 @ 8:00 PM
Amanda- Your Question:
HiMy husband had unpaid Tax debt to HRMC Because he has no money to pay it , my question is if he dies and there is no money, investment, shares, in his estate to pay this debt ,would they claim the debt from my personal saving bank account ,which is not joint??"we dont have any joint account , or joint property

Our Response:
Tax debts are paid out of the deceased's estate. Your personal savings account would not form part of this estate.
TheWillExpert - 11-Jan-17 @ 12:31 PM
Hi My husband had unpaid Tax debt to HRMC Because he has no money to pay it , my question is if he dies and there is no money, investment, shares, in his estate to pay this debt ,would they claim the debt from my personal saving bank account ,which is not joint??" we dont have any joint account , or joint property
Amanda - 10-Jan-17 @ 5:40 PM
Aunti - Your Question:
My parents died with in a short time of each without leaving a will and owing £70.000 on the mortgage.i am an only child and a student have I to pay this.

Our Response:
Funds for the mortgage will have to be found from the value of the estate (the house may need to be sold). Do check with your mortgage company to see if there was any life insurance included in which case it will be paid off automatically. Also check your parents paperwork/pensions records etc to see if any other life insurance policies were held.
TheWillExpert - 13-Dec-16 @ 11:59 AM
My parents died with in a short time of each without leaving a will and owing £70.000 on the mortgage.i am an only child and a student have I to pay this.
Aunti - 11-Dec-16 @ 10:10 PM
Nick - Your Question:
Hi, I am dealing with my father's estate. His estate has two unsecured debts (about £11k in total - bank loan and credit card) and a half share in a property (tenants in common). There is also about £4k in cash to distribute to the creditors. Funeral costs etc have been taken care of.This leaves about £7k of debt which should theoretically be met by selling the property. Given that it is half owned by somebody else, we are reluctant to sell it, and would like to negotiate with the creditors. I am happy to negotiate but I am clueless as to how strong or weak our position is, and how aggressively the banks would poursue the debt. From your experience, what sort of level of settlement would the banks accept, and how likely is it that they would write off the remainder of the debt given that the cash in the estate will cover around 35% of it?

Our Response:
We cannot say how willing the creditors would be to write off the debt. If there is a property available, the creditors may be less willing to come to some arrangement unless the property can be used to secure a repayment agreement etc. You should seek advice from a legal/financial professional who can review the entire situation. Citizens' Advice however, might be a good place to start.
TheWillExpert - 15-Sep-16 @ 2:08 PM
Hi, I am dealing with my father's estate. His estate has two unsecured debts (about £11k in total - bank loan and credit card) and a half share in a property (tenants in common). There is also about £4k in cash to distribute to the creditors. Funeral costs etc have been taken care of. This leaves about £7k of debt which should theoretically be met by selling the property. Given that it is half owned by somebody else, we are reluctant to sell it, and would like to negotiate with the creditors. I am happy to negotiate but I am clueless as to how strong or weak our position is, and how aggressively the banks would poursue the debt. From your experience, what sort of level of settlement would the banks accept, and how likely is it that they would write off the remainder of the debt given that the cash in the estate will cover around 35% of it?
Nick - 14-Sep-16 @ 3:53 PM
Kate - Your Question:
I was Lasting Power of Attorney for my mother. Although never officially registered with the Courts, the form was registered with her bank and other financial institutions which gave me control of her financial affairs during the time she was living in a nursing home. I was also dual signatory on her cheques. I was sent a copy of all invoices via email each month, but the fees for her residency at the nursing home where paid for by direct debit out of her bank account. During September 2013, I moved my mother out of the nursing home in question and any outstanding invoices were settled before the end of 2013, after which I had no further contact with the nursing home. My mother actually passed away in July 2014 and the remainder of her estate was divided up between me and my relatives as detailed in her Will. There were no outstanding debts on her behalf to settle at the time other than her funeral expenses which were paid. Her property had previously been sold prior to her death and the proceeds of the sale were used to fund the nursing home fees. Any investments she had were liquidated for the same purpose. Other than some china and a few items of furniture absolutely nothing remains of her estate.Since April 2016 I have received email correspondence from a debt collection agency employed by the above mentioned nursing home. The nursing home claim that my mother, 3 years after she moved out and 2 years after she died, has an outstanding debt to them amounting to approximately £11,000. I was also forwarded by the debt collection agency a few days ago, a formal Statement of Account dated from 2009 – 2012 on the nursing home letterhead. I have briefly reviewed this but it is unclear to me how this debt arose. My question is, can I be held personally responsible for payment of this so called debt?

Our Response:
It does seem very strange that someone would be collecting a debt from a period that ended 4 years ago without have made any prior contact in the interim. The easiest thing to do would be to ask your mother's bank for statement of the direct debits made during the period of her residency - send a copy to the nursing home and say nothing is owed. Did you put a notice in the Gazette inviting credritors to come forward at the time of the death? This means that the personal representative of the estate will not have anyliability for the debt (however sometimes residuary beneficiaries can do). We suggest you take this to a solicitor or the Citizens' Advice Bureau to take a look at further.
TheWillExpert - 23-Aug-16 @ 9:56 AM
I was Lasting Power of Attorney for my mother. Although never officially registered with the Courts, the form was registered with her bank and other financial institutions which gave me control of her financial affairs during the time she was living in a nursing home. I was also dual signatory on her cheques. I was sent a copy of all invoices via email each month, but the fees for her residency at the nursing home where paid for by direct debit out of her bank account. During September 2013, I moved my mother out of the nursing home in question and any outstanding invoices were settled before the end of 2013, after which I had no further contact with the nursing home. My mother actually passed away in July 2014 and the remainder of her estate was divided up between me and my relatives as detailed in her Will. There were no outstanding debts on her behalf to settle at the time other than her funeral expenses which were paid. Her property had previously been sold prior to her death and the proceeds of the sale were used to fund the nursing home fees. Any investments she had were liquidated for the same purpose. Other than some china and a few items of furniture absolutely nothing remains of her estate. Since April 2016 I have received email correspondence from a debt collection agency employed by the above mentioned nursing home. The nursing home claim that my mother, 3 years after she moved out and 2 years after she died, has an outstanding debt to them amounting to approximately £11,000. I was also forwarded by the debt collection agency a few days ago, a formal Statement of Account dated from 2009 – 2012 on the nursing home letterhead. I have briefly reviewed this but it is unclear to me how this debt arose. My question is, can I be held personally responsible for payment of this so called debt?
Kate - 20-Aug-16 @ 3:47 AM
JDB - Your Question:
My brother borrowed money from our mother and she wrote a note saying that it should comm off the will. Now she has died he is refusing to accept that he should pay it back as the will does not mention it. It is unclear when the note was written but may have been written after the will.

Our Response:
Is there any detail of the loan written down anywhere? If so, it will be part of the debts to be recovered etc. The note will probably not have any legality if it was not appended to the Will itself, but a solicitor would be able to advise you further on that.
TheWillExpert - 14-Jul-16 @ 10:58 AM
My brother borrowed money from our mother and she wrote a note saying that it should comm off the will. Now she has died he is refusing to accept that he should pay it back as the will does not mention it.It is unclear when the note was written but may have been written after the will.
JDB - 11-Jul-16 @ 12:52 PM
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