Life Assurance Payout!

maureen_04

If you are the named beneficiary of a life insurance that someone has been paying, are you supposed to clear the persons debts with that money.

For example credit card bills and utility bills etc?

dunstonh

The beneficiary can do what they like with it (as long as its not assigned to a lender)

-Vita-

The policy holder should have specified to the Trustee and/or beneficiary what they would like to happen with the policy proceeds. As dunstonh says, ultimately the beneficiary can do as they please!

maureen_04

I was concerned that the money would be classed as part of the deceased estate and that any debts would be expected to be paid out of the money.
So a beneficiary cannot be chased for the debts of the deceased?

Col7777

My late wife had a large credit card debt when she died along with a catalogue debt, I paid the catalogue debt but I just informed the credit card company of her death, I had to send them a copy of the death certificate as proof but they tried a few times to get the money.
Luckily I had read the small print on the credit card details they sent her when she took it out and it said if the person dies the debt is cancelled.
I actually read the paragraph out to the guy on the phone, he said it was his job to recover the debt but again I told him what the the leaflet said and he didn't like it but had to take it on the chin.
They phoned a few times asking if there was any estate, I just told them 'No and I was struggling to pay for the funeral' which I wasn't but after around 4-5 calls they gave up.

dunstonh

I was concerned that the money would be classed as part of the deceased estate and that any debts would be expected to be paid out of the money.

Its only part of the estate if the owner and beneficiary are the same (i.e. single life, single owner). If the beneficiary is someone else or it is in trust with nominated beneficiaries then it is outside of the estate.

Luckily I had read the small print on the credit card details they sent her when she took it out and it said if the person dies the debt is cancelled.

Normally debts still have to be paid out of the of the estate. Its only when the estate doesnt have the value to clear the debts that single owned debts would be written off.