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Debt After Death

By: J.A.J Aaronson - Updated: 15 Jul 2018 | 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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My mother died 2 years ago intestate. and a solicitor was used to deal with the estate thereafter. This was completed about a year ago after her old flat was sold.They issued a completion of estate distributed between her 4 sons. Last week the employed solicitor wrote to me saying they have now received a further invoice from HMRC for rental income during her lifetime and ai do not know what this is. I have called them twice to be told that the relevant team will call me back. My mother suffered from Alzheimer's in her latter years and spend a number of years in care homes. I was not privvy to her financial affairs as 2 of my brothers decided to take care of all that. I thought the flat had been sold to pay for her care but apparently not and unknown to myself the flat had been rented out to pay towards some of the care costs. I was unaware of this until the solicitor told me the flat could not be sold until the tennant is removed. Am I liable to a portion of this money (almost "£1200) that HMRC are now demanding which the Solicitor did not take into account whilst sorting the estate. I doot have this sort of spare cash as the money from my inheritance went towards paying off some of my own debts
Scarramouche - 15-Jul-18 @ 9:39 PM
Can you please help. Basically I had been with my partner for about 6 months. We were engaged,and he moved into my house. Things didn't work out so we parted and he moved into a rented room.Soon afterwards i was notified that the bailiffs were coming to my house because he owed £7333.l knew that he owed it, but he told me that he had recently arranged it to be taken out of his weekly wage (but obviously he hadn't).I was horrified at the thought of bailiffs coming to my house, so my brother reluctently lent him the £7333 on the understanding that my ex paid him £500 per month untill it was paid. My ex wrote out an agreement and signed it. I signed to say i had witnessed it. Unfortunately my ex died (he took his own life),after only making one payment. My brother now says that i will have to pay him back. Will I?
Bear - 19-Jun-18 @ 3:25 PM
Sistersdied suddenly no will 44yrs old. Our mother had supported sister and her husband by loaning £1200 a month for18 months for mortgage, expecting to be repaid. No life insurance. Husband fobbing off repaying as loaned wife and she spent it on mortgage not his debt. I've suggested lodge debt against property. Mum needs money back. Joint Tenants
Chappers - 23-Feb-18 @ 7:00 PM
Mojo - Your Question:
My Dad died 2 years ago intestate. He left a mortgage and an endowment policy made to the Executor, who is my sister. It has been agreed that his partner who still lives in the house, shall get the profit from the house sale, once the mortgage is paid. The endowment policy is to be shared between his children. If she refuses to move out to allow a sale to proceed, can the bank force the endowment policy to be used as part payment and then the Executor say the rest?

Our Response:
We don't know...you'd need to seek professional help from someone who has all the details. How can there be an executor if there is no Will?
TheWillExpert - 16-Feb-18 @ 3:32 PM
My Dad died 2 years ago intestate. He left a mortgage and an endowment policy made to the Executor, who is my sister. It has been agreed that his partner who still lives in the house,shall get the profit from the house sale,once the mortgage is paid.The endowment policy is to be shared between his children. If she refuses to move out to allow a sale to proceed, can the bank force the endowment policy to be used as part payment and then the Executor say the rest?
Mojo - 14-Feb-18 @ 11:13 PM
My uncle died about a year ago and I was executor of his will I distributed the estate equally with my brothers and now the Council are saying that back in 2014 they paid a care home 7500 bill and they have sent a letter stating that back in 21014 it came to light he had sufficient funds in his accounts. Are we liable to pay this bill.
Donnametty - 11-Feb-18 @ 11:23 AM
Mr Sponge - Your Question:
HelloMy father passed away 18 months ago, as executor I dealt his estate, all known debts were paid and his house was sold. His house was a park home on a rented the pitch space. Both the house and pitch space were sold to a new owner. Part of the sale agreement included the buyer paying any outstanding pitch fees. We have this agreement in writing. Today my solicitor emailed me to say she has received an invoice from the company that previosuly owned the pitch space, the invoice is requesting my father's estate pay £1500 in unpaid pitch fees. I do not think I should have to pay this, but I'm not sure how best to take this forward, the invoicer has threatend to take me to court if I don't pay it. Can anyone advise me?

Our Response:
Since you have an agreement in writing, simply send a copy of the agreement to the invoicer saying you are not liable for payment of this debt and that the new owner had agreed to pay this. The company should simply re-invoice the new owner. Consult CAB or go back to your solicitor if they refuse.
TheWillExpert - 23-Jan-18 @ 2:16 PM
My father in law passed away last year. We now have a bill from HMRC for income taxes he owes for the last financial year. Is his wife liable for this? Will she be forced to pay it? Many thanks
Sj - 21-Jan-18 @ 9:58 PM
Hello My father passed away 18 months ago, as executor I dealt his estate, all known debts were paid and his house was sold. His house was a park home on a rented the pitch space. Both the house and pitch space were sold to a new owner. Part of the sale agreement included the buyer paying any outstanding pitch fees. We have this agreement in writing. Today my solicitor emailed me to say she has received an invoice from the company that previosuly owned the pitch space, the invoice is requesting my father's estate pay £1500 in unpaid pitch fees. I do not think I should have to pay this, but I'm not sure how best to take this forward, the invoicer has threatend to take me to court if I don't pay it. Can anyone advise me?
Mr Sponge - 20-Jan-18 @ 12:22 PM
My mother passed away 10 months ago. After settling her debts, the balance of her assets amounting to approximately £7000 (including a refund from HMRC) was shared between her grandchildren. HMRC are now demanding £605 tax from her estate. Do I have to pay this? I am a pensioner and cannot afford it.
Jo - 11-Jan-18 @ 12:01 PM
Cymro - Your Question:
My mother died in June 2017, in a housing association sheltered complex. She had Council help with care fees, but the local authority made a mistake in calculating the care costs and are asking me, the son, to pay £950 of the arrears.Do I have to pay as it was the Councils fault in their assessment of the care costs. My mother left £1000 after all funeral costs etc were paid.Thank youColin

Our Response:
Ask for full details of how the costs arose, what they were for, when they mistake was uncovered, why it wasn't addressed until after your mother had died. Were the fees paid from a pension? Was she due the balance of that payment from the council itself? There's not really much information here so we can't really advise. If the debt is genuine, the money may have to be paid from her estate after all other expenses have been paid etc.
TheWillExpert - 8-Jan-18 @ 11:42 AM
My mother died in June 2017, in a housing association sheltered complex. She had Council help with care fees, but the local authority made a mistake in calculating the care costs and are asking me, the son, to pay £950 of the arrears. Do I have to pay as it was the Councils fault in their assessment of the care costs. My mother left £1000 after all funeral costs etc were paid. Thank you Colin
Cymro - 5-Jan-18 @ 11:13 AM
wales1982 - Your Question:
My nan has a £1,000 debt with a catalgue but shes adamant the debt dies with her. She rents her house and has no assets so does the debt die with her?Thanks

Our Response:
The debt should come out of her estate. If there are insufficient funds in the estate to pay the debt it's likely it will be written off.
TheWillExpert - 2-Jan-18 @ 2:47 PM
My nan has a £1,000 debt with a catalgue but shes adamant the debt dies with her. She rents her house and has no assets so does the debt die with her? Thanks
wales1982 - 25-Dec-17 @ 3:17 PM
Rar - Your Question:
My friend died without leaving a will. He has property which will cover his debts I think.He had life insurange which was paid out while he was alive due to terminal illness,he wanted to divide it between 3 people myself his sister and another friend but didn't as he died before he could do that.The money was paid into his account and as far as I know still there.His sister doesn't want to deal with his estate so someone else maybe a creditor will have to be appointed.My question is, as she would have been the beneficiarie of his life insurance had it not already been paid to him does she have a claim to that money or will the administrator use it to pay his debts.

Our Response:
Usually if a life insurance policy has a designated beneficiarythe estate goes directly to them. However as the insurance plan was cashed in earlyit's likely it will form part of the estate.
TheWillExpert - 8-Dec-17 @ 11:45 AM
My friend died without leaving a will. He has property which will cover his debts I think. He had life insurange which was paid out while he was alive due to terminal illness,he wanted to divide it between 3 people myself his sister and another friend but didn't as he died before he could do that.The money was paid into his account and as far as I know still there. His sister doesn't want to deal with his estate so someone else maybe a creditor will have to be appointed. My question is, as she would have been the beneficiarie of his life insurance had it not already been paid to him does she have a claim to that money or will the administrator use it to pay his debts.
Rar - 8-Dec-17 @ 9:58 AM
Toby - Your Question:
My wife was power of attorney for their bank over her nan & grandad who has passed away recently. They lived in a carehome & fees over a year built up to owing £10,000! No money left in estate & money which was there covered their funerals so is my wife liable to pay this?

Our Response:
How had the fees built up to that extent? Had your wife not arranged payment (on the basis that she had power of attorney over their affairs). Usually if someone passes away any debts are cleared from whatever is left in the estate. If your wife was responsible for paying the carehome fees as she had POA, then she may be responsible for paying the debt. You should really seek professional advice, with details of when the debts accrued, when POA was obtained etc.
TheWillExpert - 9-Oct-17 @ 3:09 PM
My wife was power of attorney fortheir bank over her nan & grandad who has passed away recently. They lived in a carehome & fees over a year built up to owing £10,000! No money left in estate & money which was there covered their funerals so is my wife liable to pay this?
Toby - 8-Oct-17 @ 9:25 PM
jane - Your Question:
My mother in law has passed away and I have been sent a bill for money owed fpr her nursing care fees. She has no money the only policy due will pay for her funeral and we will still owe on that. Are we laible to pay the fees as im on a small income. Any advice would be greatful thanks

Our Response:
No, any fees should come from her "estate". If there are insufficient funds, you as relatives cannot be held liable for these debts.
TheWillExpert - 3-Oct-17 @ 3:42 PM
My mother in law has passed away and i have been sent a bill for money owed fpr her nursing care fees. She has no money the only policy due will pay for her funeral and we will still owe on that. Are we laible to pay the fees as im on a small income. Any advice would be greatful thanks
jane - 2-Oct-17 @ 1:28 PM
Kel - Your Question:
My father passed away April this year. I've now found he owes a lot of money to different people. Notts county council for the care he received in his last months also hmrc for tax and late fines. I've spoken to ncc. But hmrc are saying I could be liable for this bill. They say it could be passed to me as I'm next of kin. My father left nothing no money no estate no will. Is this true could I end up paying them this outstanding bill it's in the thousands so I'm starting to panic.

Our Response:
No. Any debts should be paid out of your father's estate. If there's not enough money you as his child cannot be held responsible for any debts (unless theyare joint debts such as jointly owned property or loan that you guaranteed etc).A financial or debt advisor or solicitor will be able to help you with this.
TheWillExpert - 25-Sep-17 @ 3:02 PM
My father passed away April this year. I've now found he owes a lot of money to different people.Notts county council for the care he received in his last months also hmrc for tax and late fines.I've spoken to ncc. But hmrc are saying I could be liable for this bill.They say it could be passed to me as I'm next of kin. My father left nothing no money no estate no will. Is this true could I end up paying them this outstanding bill it's in the thousands so I'm starting to panic.
Kel - 23-Sep-17 @ 9:50 AM
LKC - Your Question:
My father has recently passed and we believe he has debts of approximately £10k. He has a property which is owned outright and a tiny life insurance policy which will play out approx £3K. Will my sister (who lived with him) be made to sell the house to pay the debt? Thanks.

Our Response:
If your sister's name is not on the title deeds then she may be forced to sell the property to clear the outstanding debts. The normal course of events is that when someone dies, any debts are paid from money and property left by the deceased.
TheWillExpert - 27-Jul-17 @ 2:09 PM
My father has recently passed and we believe he has debts of approximately £10k.He has a property which is owned outright and a tiny life insurance policy which will play out approx £3K.Will my sister (who lived with him) be made to sell the house to pay the debt?Thanks.
LKC - 24-Jul-17 @ 5:27 PM
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
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