Funeral costs, estates and a loan

Old_Wolf

First of all, I'm sorry this possibly isn't quite the right forum, but it does seem to be the most popular one for estate style questions.

My Gran died recently, leaving her estate jointly to my Mum and my Uncle who are also named in the will as executors. As the estate was not "cash rich" we have completed confirmation ourselves without a problem, and have began the process of in gathering assets.

Asset wise she had only a bank account which contained (we thought) just enough to cover the cost of the funeral. We have already looked at valuing the property and selling it, but obviously this isn't an instant process. She did have some insurance policies, but they were taken out when she was much, much younger and will not gather more than a few hundred pounds. The problem we have just encountered is that she did also have a loan and (unfortunately) it was with the same provider her bank account was with. They have therefore emptied her account of money, and written to us to say they will be in touch for the balance of the loan.

Now, we do understand and accept that we must pay the loan from the estate, and are more than happy and willing to do so once enough funds are available. However, am I wrong in thinking that we were entitled to pay the funeral costs BEFORE the loan? We have now been left in the position where one of us is going to have to borrow money to pay the funeral, as my Gran's death came within weeks of another family death and we simply don't have the savings available to pay both.

I have read several websites which state that the order executors must pay back debts is funeral costs > secured debts > unsecured debts - however this seems to have been taken out of our hands and if it is correct, how do we go about rectifying the situation if we can.

Thank you in advance for any advice.

tanith

I'm sure I have read on this site that if you approach the Funeral Directers and explain the circumstances they will defer payment until the estate is settled..

Savvy_Sue

You can also ask the FD to invoice the bank direct, I believe.

I think you're right about the order of paying debts, and I would start by writing to say that although you appreciate that the loan is outstanding, they will be receiving the bill for the funeral direct, for their prompt settlement.

Surfbabe

My mum died a few weeks ago and I was told that the only thing that could be paid from her bank account after her death was the funeral expenses. Everything else had to wait until probate has been granted.

Old_Wolf

Thanks for the responses. We've contacted the bank today and they are going to call us back Monday when the right person is available, I will update then, hopefully they will agree to allow us to pay the funeral costs before they take their share. I know the funeral director would probably be reasonable about it, but as far as I understand it the executor would be "in trouble" for paying off the debts in an order other than funeral > secured > unsecured, so I don't think it's entirely right that the bank can choose to skip the queue as it were - especially with no contact, and without even asking about Confirmation (Scottish version of probate) which would show that the bank account was the only available funds to pay the funeral.

Willman_Rodders

Old_Wolf wrote: »

Asset wise she had only a bank account which contained (we thought) just enough to cover the cost of the funeral....

.... The problem we have just encountered is that she did also have a loan and (unfortunately) it was with the same provider her bank account was with. They have therefore emptied her account of money, and written to us to say they will be in touch for the balance of the loan.

A bank can 'set off' a person's borrowing liability with their savings balance. Further, they can do this at any time, though usually it is done when the Bank feel the customer/banker relationship has terminated.

Indeed, it is good practise by the Bank to undertake this task when someone has died; it crystalises the Bank's position.

With regards to the small life policies they might only be worth a 'few hundred' - but sometimes they can be worth a sizeable amount of money. This is especially true where they have been taken out with an institution that has a good record of allocating bonuses to the plan over the very profitable years of the 70 to 1990s. You might be pleasently surprised, or just have a good laugh at the pitiful payout. the only way to find out is to approach the life companies concerned.

sloughflint

Willman_Rodders wrote: »

Indeed, it is good practise by the Bank to undertake this task when someone has died; it crystalises the Bank's position.

Are you quite sure on this?

I'm with the op on this one:

Old_Wolf wrote: »

but as far as I understand it the executor would be "in trouble" for paying off the debts in an order other than funeral > secured > unsecured, so I don't think it's entirely right that the bank can choose to skip the queue as it were

I dare say most of the time things eventually work out ok- until they come across an estate with insufficient funds to meet all the debts. I like Savvy Sue's proposal.

googler

The trouble will be finding someone at the bank who [a] is in the know about estates, confirmation, etc and gives a toss about it.

From my experience, you'll get first contact with a callow youth with no experience, then speak to the 'branch manager', who despite their youth, despite their title, will lack the authority to manage anything, and will refer you to the bank's 'customer service centre', who, having referred you round the houses to a few others within the bank, will actually be of no 'service' to you whatsoever...... Brace yourself.

Which bank?

amersall

when my mum died, she had a cc debt, i contacted mbna and was put thriugh to someone who deals with deceased peoples accounts, the lady could not have been more helpfull, as it was not a priority debt the account was frozen until the estate was settled if there were funds left they would then get the money, if there were no monies left then the account would be written off, luckily the card was repaid. i dont think your bank have handled this at all well and i would put a complaint in. my sympathys to you and your family

googler

I may be wrong, but I think this - advice from the Govt - states that it's the executor's responsibility to distribute the estate, not the bank's.

Yes, the estate owes them a debt in the form of the loan, but since they seem to have arbitrarily helped themselves to their debt from the estate, rather than waiting for you, as the executors, to distribute it to them, and they also seem to have settled their own debt in advance of the 6-month guideline for awaiting any further creditors, I would suggest you follow the advice in para 13, as in;

"The executor should not distribute any of the estate to those entitled to it until a period of six months has passed since the date of the death. This is to allow persons or companies with a claim on the estate to make the claim known. After that period the executor may distribute the estate without having regard to any possible claims which have not been intimated. If any creditor or beneficiary presses for payment during the six month period a solicitor should be consulted."

and also para 15

"If the debts are greater than the assets of an estate, the executor should seek legal advice. There are complicated rules for paying out what assets there are to the various creditors.

Do not be rushed into parting with goods before taking legal advice. Hire purchase goods cannot be repossessed after a third of the purchase price has been paid unless the creditor gets a court order."

I see no evidence from your post that your bank is paying any attention to such rules, and they may possibly have acted illegally in helping themselves to their own debt from the estate......

googler

Old_Wolf wrote: »

Thanks for the responses. We've contacted the bank today and they are going to call us back Monday when the right person is available, I will update then, hopefully they will agree to allow us to pay the funeral costs before they take their share. I know the funeral director would probably be reasonable about it, but as far as I understand it the executor would be "in trouble" for paying off the debts in an order other than funeral > secured > unsecured, so I don't think it's entirely right that the bank can choose to skip the queue as it were - especially with no contact, and without even asking about Confirmation (Scottish version of probate) which would show that the bank account was the only available funds to pay the funeral.

You're unlikely to get into trouble because you, as executor, haven't acted to settle the debt with the bank. All you've done, as far as I can gather, is notify the bank of the passing of the account-holder.

They've arbitrarily helped themselves to their own debt from the estate, without regard to the 6-month period that you should be waiting for further creditors, and without regard to any rules that you should be following for determining a 'pecking order' for the debts owed to others from the estate.

As I said in the previous post, consult a solicitor who is well-versed in estate matters after death; probably the one who helped draw up the will? I think a stiffly-worded letter to the bank from the solicitor is in order, myself.....

Which bank is it?