Debt After Death

[tony wright]

Driving home tonight we got embroiled in a small discussion on above. Brother in Law said that if you were to die (Wife has already passed away) in debt and your remaining estate didn’t cover this, it would be passed on to your children. He was talking about mortgages, loans, taxes etc. I’d never heard of this but still said he was talking bks, am I wrong?

[Stella Tortoise]

tony wright said:

Driving home tonight we got embroiled in a small discussion on above. Brother in Law said that if you were to die (Wife has already passed away) in debt and your remaining estate didn’t cover this, it would be passed on to your children. He was talking about mortgages, loans, taxes etc. I’d never heard of this but still said he was talking bks, am I wrong?

Not entirely.

[Whatsmyname]

Simple answer,

If the debt is in sole name after everything you owe has been cleared as much as possible by your estate then the debt will die with you.

In other countries like Germany it can be passed on to relatives IIRC.

[So]

Stella Tortoise said:

tony wright said:

Driving home tonight we got embroiled in a small discussion on above. Brother in Law said that if you were to die (Wife has already passed away) in debt and your remaining estate didn’t cover this, it would be passed on to your children. He was talking about mortgages, loans, taxes etc. I’d never heard of this but still said he was talking bks, am I wrong?

Not entirely.

I am intrigued. What debts don't die with the debtor?

[tony wright]

My argument was, if the child hadn’t spoken to their Father for years due to a disagreement or other issue, but was the sole heir and said I want nothing to do with him or his money, how could they then hand him a debt he had nothing to do with. Looks like we may both have been talking bks

[Graveworm]

So said:

I am intrigued. What debts don't die with the debtor?

Few debts die with the debtor. But I think the OP is asking about debts that can extend beyond an insolvent estate. I know of a couple of examples. Joint debts or where there have been "Gift" disbursements prior to death.
One other issue may be if an executor failed to pay a priority debt then the executor could be liable.

[anonymous-user]

tony wright said:

My argument was, if the child hadn’t spoken to their Father for years due to a disagreement or other issue, but was the sole heir and said I want nothing to do with him or his money, how could they then hand him a debt he had nothing to do with. Looks like we may both have been talking bks

I think you have it about right.

[So]

Graveworm said:

So said:

I am intrigued. What debts don't die with the debtor?

Few debts die with the debtor. But I think the OP is asking about debts that can extend beyond an insolvent estate. I know of a couple of examples. Joint debts or where there have been "Gift" disbursements prior to death.
One other issue may be if an executor failed to pay a priority debt then the executor could be liable.

I chose my words poorly, probably because I was in my cups. You put it much better.

[Graunching_dave]

When my dad died his life insurance didn’t quite cover the mortgage so I had to cover the shortfall so that his other half (who didn’t have any money) could continue to live there.

My Aunt (dads sister) who works at a solicitors advised me to clear his credit card debt so that the credit card company didn’t levy against his portion of the value of his and his partners house. This was done so that his portion of their house, that I inherited, didn’t have an ever increasing debt against it.

That lot cost me around £13k. At the time I wasn’t told that his partner inherited £25k cash but that is a different story and was a very bitter pill to swallow.

His partner only just recently passed away and so I’ve been going through the paperwork and it seems my dad was terrible with money, unopened letters from HMRC for final demands etc dating back 25 years or so. Oddly enough the tax debt (if there was any in the end, I think he paid it off in a payment plan) wouldn’t have passed to me.

So there we have it, the debts do sometimes get passed on but I guess I wouldn’t HAVE to have paid them if I wasn’t interested in getting any inheritance.

[PurpleMoonlight]

Graunching_dave said:

When my dad died his life insurance didn’t quite cover the mortgage so I had to cover the shortfall so that his other half (who didn’t have any money) could continue to live there.

My Aunt (dads sister) who works at a solicitors advised me to clear his credit card debt so that the credit card company didn’t levy against his portion of the value of his and his partners house. This was done so that his portion of their house, that I inherited, didn’t have an ever increasing debt against it.

That lot cost me around £13k. At the time I wasn’t told that his partner inherited £25k cash but that is a different story and was a very bitter pill to swallow.

His partner only just recently passed away and so I’ve been going through the paperwork and it seems my dad was terrible with money, unopened letters from HMRC for final demands etc dating back 25 years or so. Oddly enough the tax debt (if there was any in the end, I think he paid it off in a payment plan) wouldn’t have passed to me.

So there we have it, the debts do sometimes get passed on but I guess I wouldn’t HAVE to have paid them if I wasn’t interested in getting any inheritance.

No, your dads assets should have been utilised to settle his debts. You chose to pay them instead to avoid selling the assets.

That is not the same as the debt being passed on to a third party.

[Byker28i]

anonymous said:

[redacted]

I told them the following day after the death, they still paid the next payment so we had two months to pay back.

[TooMany2cvs]

tony wright said:

Driving home tonight we got embroiled in a small discussion on above. Brother in Law said that if you were to die (Wife has already passed away) in debt and your remaining estate didn’t cover this, it would be passed on to your children. He was talking about mortgages, loans, taxes etc. I’d never heard of this but still said he was talking bks, am I wrong?

Yes, you are. He is.

Remember with a mortgage, though, that there's a corresponding asset that's usually more valuable than the debt.

[4x4Tyke]

tony wright said:

Driving home tonight we got embroiled in a small discussion on above. Brother in Law said that if you were to die (Wife has already passed away) in debt and your remaining estate didn’t cover this, it would be passed on to your children. He was talking about mortgages, loans, taxes etc. I’d never heard of this but still said he was talking bks, am I wrong?

BIL is wrong. The debts don't get passed on to children, or anybody else (unless they are already joint debts).

They are 'passed on' to the estate, in the sense the estate is responsible for settling any debts from available resources before it pays out any legacies.

If the estate is insolvent, there is insufficient money in the estate to cover all debts then, estate fees such as funeral expenses etc are the highest priority debts. Above even the regular highest priority debts like HMRC/DWP, then the traditional priority debts, regular/ordinary debts, finally legacies. Any unsettled debts are written off when the estate is insolvent.

I'm in this position at the moment, dealing with my uncles insolvent estate, there is insufficient funds to cover even the most basic funeral.

Edited by 4x4Tyke on Sunday 23 September 11:26

[craigjm]

4x4Tyke said:

BIL is wrong. The debts don't get passed on to children, or anybody else (unless they are already joint debts).

They are 'passed on' to the estate, in the sense the estate is responsible for settling any debts from available resources before it pays out any legacies.

If the estate is insolvent, there is insufficient money in the estate to cover all debts then, estate fees such as funeral expenses etc are the highest priority debts. Above even the regular highest priority debts like HMRC/DWP, then the traditional priority debts, regular/ordinary debts, finally legacies. Any unsettled debts are written off when the estate is insolvent.

I'm in this position at the moment, dealing with my uncles insolvent estate, there is insufficient funds to cover even the most funeral.

Edited by 4x4Tyke on Sunday 23 September 10:01

Exactly this. Any other “situation” mentioned here where this does not hold true is becaaue a survivor is living in the asset or there are joint names on a debt. You cannot put your children in debt from your own personal borrowing.

[FiF]

The order in which debts on an insolvent estate should be paid are slightly different from the above.

Secured creditors, eg mortgage, car loan
Funeral expenses see note below *
Testamentary expenses ie administration of estate
Preferential creditors e.g. HMRC, wages to employees
Unsecured creditors, eg council tax, utility bills, garage petrol account, credit cards etc
Interest due on unsecured loans
Deferred debt, eg informal family loan

• *Note, if a bank, say, has multiple accounts, eg current account, savings account, credit card, loan, they can legally wind all these together and see what the balance is, positive or negative. If the overall balance is negative then it may / will not be possible to take money from a savings account to pay funeral expenses.

https://www.bereavementadvice.org/topics/probate-a...


https://www.begbies-traynorgroup.com/articles/inso...

[kestral]

tony wright said:

Driving home tonight we got embroiled in a small discussion on above. Brother in Law said that if you were to die (Wife has already passed away) in debt and your remaining estate didn’t cover this, it would be passed on to your children. He was talking about mortgages, loans, taxes etc. I’d never heard of this but still said he was talking bks, am I wrong?

He was talking bks.

[7795]

craigjm said:

4x4Tyke said:

BIL is wrong. The debts don't get passed on to children, or anybody else (unless they are already joint debts).

They are 'passed on' to the estate, in the sense the estate is responsible for settling any debts from available resources before it pays out any legacies.

If the estate is insolvent, there is insufficient money in the estate to cover all debts then, estate fees such as funeral expenses etc are the highest priority debts. Above even the regular highest priority debts like HMRC/DWP, then the traditional priority debts, regular/ordinary debts, finally legacies. Any unsettled debts are written off when the estate is insolvent.

I'm in this position at the moment, dealing with my uncles insolvent estate, there is insufficient funds to cover even the most funeral.

Edited by 4x4Tyke on Sunday 23 September 10:01

Exactly this. Any other “situation” mentioned here where this does not hold true is becaaue a survivor is living in the asset or there are joint names on a debt. You cannot put your children in debt from your own personal borrowing.

...IF you "give away" all your assets within 7 years of your death it can be judged to be to avoiding inheritance tax/debts etc...

In this situation, there may be an attempt to reclaim the asset/monies etc back to the estate to pay the debts of the deceased. The HMRC are particularly rigid on this. I've seen this happen and a house bought with these type of monies that had to be remortgaged to pay ££ amount back to the estate to settle an outstanding Income Tax bill. Time was given for the remortgage and payment and even this they tried to be clever and devious!!!!

The thinking, for whatever reason, and however badly advised was give it away before you die and not to HMRC. Hmmm...

Edited by 7795 on Monday 24th September 13:52

[TooMany2cvs]

7795 said:

...IF you "give away" all your assets within 7 years of your death it can be judged to be to avoiding inheritance tax/debts etc...

In this situation, there may be an attempt to reclaim the asset/monies etc back to the estate to pay the debts of the deceased.

You're getting confused with "deprivation of assets" in the context of claiming poverty and getting the local authority to pay for residential care.

There's a taper on gifts for IHT over seven years.
https://www.gov.uk/inheritance-tax/gifts

[7795]

TooMany2cvs said:

7795 said:

...IF you "give away" all your assets within 7 years of your death it can be judged to be to avoiding inheritance tax/debts etc...

In this situation, there may be an attempt to reclaim the asset/monies etc back to the estate to pay the debts of the deceased.

You're getting confused with "deprivation of assets" in the context of claiming poverty and getting the local authority to pay for residential care.

There's a taper on gifts for IHT over seven years.
https://www.gov.uk/inheritance-tax/gifts

I'm not, but thanks. Terminology aside, the example I used was real.

[James P]

If someone who is insolvent dies, particular rules can apply. See link below.

If jointly owned assets transfer by survivorship then watch out for an administration application being made to bring assets back into the scope of creditors being paid (although clearly thry should be paid before anyone inherits anything.

https://www.insolvencydirect.bis.gov.uk/casehelpma...