Inherited debt

lisyloo

I thought that unless the gift was to a spouse there would be tax payable on anything above about £7k. Have I misunderstood?

Yes.
There is no tax on gifts.
However if the donor dies within 7 years of the gift there can be inheritance tax.

In your case there won't be any inheritance tax because inheritance tax only kicks in when the estate is worth more than £263K which obviously isn't the case.

Don't know if this has been made clear yet but I'll say it anyway.
You do NOT have to inherit your mothers estate.
However you cannot take the assets but not the debts.
It's all or nothing.

There might be an exception with the house (depending on house it is owned - jointly or tenants in common) because one way it passes to the survivors outside of the estate.

You need to go to a solicitor and find out whether the house is inside or outside the estate.

If it's outside then you are fine. You get the house.
You then need to get advice about what to do about the estate. From the sounds of it that will be - don't take it on.
If the house is inside the estate then that's bad, because her part of the house can be used to pay off her debts, which might mean the house needs to be sold.

A solicitor should be able to tell you what % your mother owns. Houses are not always split equally between those named on the deeds.

lisyloo

Also be aware that a number of companies are quite unscrupulous and may insist tht you owe them money when you don't - they may even try to make it look official.
No-one is responsible for anyone else debt (unless they have a joint liability agreement like a joint credit card).

You are not liable for your mothers debts unless either
1) you take on her estate
2) you had a joint agreement with her like a joint credit card

If you have not taken on her estate then the estate is liable and not you.

Some companies may well try and frighten you.

You obviously cannot ignore any letters like this but I would suggest getting advice and don't take them at face value.

MarkyMarkD

You do NOT have to inherit your mothers estate.

However you cannot take the assets but not the debts.
It's all or nothing.

There might be an exception with the house (depending on house it is owned - jointly or tenants in common) because one way it passes to the survivors outside of the estate.

You need to go to a solicitor and find out whether the house is inside or outside the estate.

If it's outside then you are fine. You get the house.
You then need to get advice about what to do about the estate. From the sounds of it that will be - don't take it on.
If the house is inside the estate then that's bad, because her part of the house can be used to pay off her debts, which might mean the house needs to be sold.

A solicitor should be able to tell you what % your mother owns. Houses are not always split equally between those named on the deeds.

Read my earlier post, lisy. It is not true that it depends how the house is jointly owned. If the house is jointly owned, it can't be inherited by-passing the debts.

Margaret_Millne

I'm not sure whether this is still the case, or whether it is relevant in this case, but 28 years ago when I left my first husband my solicitor suggested that I "sever the joint tenancy" of the house.

The purpose of this was that if I didn't and anything happened to me my ex husband got my share automatically, and if I did then my share went to my family and not the ex.

Don't know if it helps, but possibly it will.

MarkyMarkD

I don't think that you are right, DFC.

It used to be the case that if you owned property as "Joint Tenants" then the property would pass automatically to the surviving owner. This meant the property could not be sold to pay off debts. From April 2001 the rules have been changed. It is now possible for creditors to apply for an "Insolvency Administration Order" within 5 years of the person dying, which effectively splits the property down the middle as if it were a "Tenancy in Common".
The surviving owner could be ordered to pay the outstanding debts or risk having the house sold. Half of the sale proceeds, after any mortgages were cleared, could be used to pay creditors unless the court agrees there are exceptional circumstances. This makes it very important that a surviving owner negotiates with any creditors to make arrangements to pay the debts back and avoid this procedure being used.


from http://www.clear-your-debt.co.uk/debt-death.htm

The only positive thing is that the value of a part share in a property, which is occupied by surviving part owners, is likely to be quite low for probate purposes.  But that's probably no help if the creditors could force you to sell up to meet the debt from her share.

I know it's easy to say this in hindsight, but adding your mother to your deeds was a very foolish and pointless thing to do.  I can't see why you did so.  I also have to wonder whether she did so so that she could run up debt, on the basis of being a property owner.

You say she ran up £11k of debt on a card in your name.  Why didn't you notice?

To save your scrolling finger, lisy :S

lisyloo

Thanks - I didn't know about that.

Debt_Free_Chick

Don't know if this has been made clear yet but I'll say it anyway.
You do NOT have to inherit your mothers estate.
However you cannot take the assets but not the debts.
It's all or nothing.

Lisyloo, I don't think this is correct. On death, all assets & debts fall into the estate. The executors will then be responsible for meeting the debts using the assets. If there are any assets left over, they then get distributed in accordance with the will. If there are debts left over, then they "die" with the person concerned (except for the complication here regarding the possibility of a charge against the deceased's interest in the property).

If no will, then the process is slightly different, but the result is the same.

You do not inherit debt - and you only inherit assets if there are any left over, after any of the deceased's debts are paid.

Regards

carl310166

My mother passed away on the 23rd,and since then have been trying to sort out her affairs.

I found out that she owed money to several companies,i rang them all,and i was quite suprised at the differing responses.

One debt collection company were very helpful and just asked for a copy of the death cert and a covering letter,and they told me they would write off the debt.

Provident personal credit were the same,and were very good.

Another asked for a copy of the death cert and a covering letter,but they didn't reveal what would happen.

The worst were 2 utilitiy companies who insisted the bill had to be paid.

Basically,i expected to have a problem with loan and debt companies,but they were very understanding

I don't know if this helps in any way.

deemy2004

They probably insure the debt in the case of the debtor passing away.

MarkyMarkD

Or the debtor might have been paying for insurance (on the loan) for precisely that purpose. In which case they aren't being generous writing it off - just applying the terms of the insurance.

Whereas nobody (hardly) insures their utility bill payments.