Dying in debt

Dying in debt is something that many of us worry about. But, should we be worried or should we throw caution to the wind and spend what we don’t have in our final years?

I recently read an article written by a woman who is absolutely determined to do just that. To die in debt would be to succeed as far as she’s concerned. Why, she writes, should she care? She’ll be dead. Which of course, she will be. Purposefully dying in debt. Oh, the sheer recklessness of it!

Hold on, are you even allowed to die in debt?

Before we all emit a collective gasp of horror at the irresponsibleness of it all let’s just consider the current economic climate – which does not appear to be getting any better any time soon. According to press, the UK is in a DEBT CRISIS. The mortgage lending age has been increased in fact, Nationwide will give you a mortgage at 85. I’m not sure if this is crazy or not. So, it’s probably fair to say we’ll all die in debt. Just the depth of the hole will vary.

So, what of the reckless spending of the woman who wrote the article? Does it matter? It’s probably worth pointing out at this point that she’s single, has no children and her mortgage is paid off. The debts that she is talking about running up are relatively innocuous, credit cards, luxury holidays…. She’s not getting into debt because she can’t afford to live as many in the UK are – she’s enjoying the end of her life as she wants to! Plus, it’ll get paid out of her estate when she dies. The plan is not to leave a load of unpaid debt but just not to leave her money to anyone – especially not the state. So, not so controversial as the headline would suggest.

It’s not just us ordinary folk that die in debt, oh no, you’d be surprised how many famous people die with a spectacularly-eye-watering amount of debt! Michael Jackson, was reportedly $400 million in the hole when he passed away (how is that even possible). Sammy Davies Jnr apparently owed the IRS around $15 million and, socialite Tara Palmer-Thomkinson owed around £200k at the time of her death.

How to deal with the debts of someone who has died

Dealing with the death of a loved one is never easy. There are many loose ends to tie up, end of life admin can be surprisingly complex. We find ourselves carrying out tasks that we never thought we’d be doing and possibly don’t really feel equipped to carry out. It’s a sad time. And, dealing with a tangle of creditors can make it just a bit sadder and stressful.

You’ve been named as Executor in someone’s Will. What does dealing with their debts entail?

Determine all debts

Unsurprisingly the first thing you will need to do is to take stock of all the deceased debts. Make a list of everything that is owed; how much and to who.

How is the money owed?
You’ll also need to establish which are secured – against the property or, unsecured. If there is a guarantor and if how the debt is owed – jointly, like a mortgage or individually – a credit card for example, as this will determine how each debt should be paid.

Undisclosed debts

As Executor it is your responsibility to track down EVERY debt that was outstanding at the time the deceased passed away. Should you miss a creditor you may be held personally responsible for settling the debt so you must do the proper due diligence.

So, before you make any payments place an advert in the local press asking for any of the deceased creditors to come forward. Professional executors also advertise in the London Gazette so you may want to consider that too – you really don’t want to end up repaying a debt that wasn’t yours.

It’s also worth bearing in mind that people have six months to put in a claim for inheritance if not named, that is why professionals take longer as, if a successful challenge is made and the estate has been distributed then you, the executor is again personally liable.

Paying off the debts

There is an awful lot to do when dealing with someone’s estate and having a load of creditors breathing down your neck is one thing you could probably do without.

Contact all creditors

Let them know that you are dealing with the estate and request a letter/statement with the final balance. Also, request that they stop any direct debits while you go through the legal process. That should satisfy them for a while.

Payment insurance

Next, determine if the deceased took out any insurances that may pay off some if not all the debts.

For example a life insurance policy or (the dreaded!) PPI. It’s worth checking all creditors not just the big ones.

If there is insurance contact the provider and they will help you through the process. If there isn’t insurance contact the creditors to make payment arrangements. Providing of course, they haven’t already made a claim on the estate.

Pay creditors in order of priority

• Secured debts first – that’s mortgages and any big loans
• Funeral and estate administration costs
• Individual debts – credit cards etc are bottom of the pile

It is only then that any remaining money and/or assets can be distributed to the beneficiaries of the Will.

What if there isn’t enough to pay everyone

If, after the entire estate has been cleaned out – all assets liquidated and accounts scraped clean, there isn’t enough to go round, the estate is declared an ‘insolvent estate’. At this point you may wish to seek professional advice from a solicitor or probate specialist.

Full estate administration service

Here at Future Legal Services we offer a comprehensive estate administration service. This means that your family won’t have to deal with any of the above. Our rates – capped at 1% – are some of the most competitive on the market. Why not give us a call today on 01322 664885 or email us here and we can talk you through the service.

And finally…

For those of you that have made it all the way to the end here’s the link to the article mentioned way back at the beginning of this post. Dying in debt: http://www.dailymail.co.uk/femail/article-5052143/Why-want-die-debt-JO-FOLEY.html

Sources
http://www.dailymail.co.uk/femail/article-5052143/Why-want-die-debt-JO-FOLEY.html
https://www.moneyadviceservice.org.uk/en/articles/dealing-with-the-debts-of-someone-who-has-died