Can creditors make you pay the debts to them from life insurance?

maureen_04

Any debts solely in someone else's name are not liable to be paid by anyone else. However, as stated any capital / estate left by the deceased is expected to be used to clear debts.
If you make a will leaving all your assets to your partner then he cannot be chased for the debts, the honourable thing to do is obviously to pay them. The only people who have a legal right to any money before anyone else is the Tax man, no one else can demand payment from a spouse, if the debts are joint then he automatically becomes responsible for them.

lisyloo

the honourable thing to do is obviously to pay them

I know we are now getting into moral opinions, but I'm not sure I agree with that statement.
If person A has paid for a facility to provide an amount of money to person B, but person A has debts elsewhere, then why should person B feel morally obliged to pay the debts?
The lenders did not insure the debt or insist on insurance, they took a gamble which didn't pay off, why should person B feel obliged to help them out with their commercial gamble?
If lenders want certain insurance then they should build it into their price or insist on it (mortgage lenders for example insist on MIGs and buildings insurance).

maureen_04

Lisy Loo; I was not passing judgement on anyone, but was actually referring to small debts such as utilities and similar. Not massive loans and the like.

Seldon; I think it really depends on how much money is involved. I have heard of cases where debts have been ignored and an estate of less than £15k being distributed between family members as probate was not required nothing was mentioned about debts. The debtors were just told that nothing was left so they got nothing.
There is no legal right of any debt agency or creditor to chase anyone other than the person who owed the money. The only exceptions are if you are a guarantor, or the debt is in joint names. No court in the land would force a spouse to pay their partners debt.

lisyloo

Before your assets can be distributed, the executors or administrators need to settle whatever debts are outstanding against the estate. This may mean your partner gets zilch, regardless of what any will may say.

Can I just clarify something here (sorry if I'm being dumb).

Are you only talking about assets that pass into the estate or are you saying that even if a life insurance was in "trust" (an done properly via solicitors) and hence outside the estate that it could be under threat from debts.

amersall

Selden wrote: »

Sadly you can't dump your debts in this way.

Before your assets can be distributed, the executors or administrators need to settle whatever debts are outstanding against the estate. This may mean your partner gets zilch, regardless of what any will may say. There is some basic guidance on this area on (click here) the DirectGov site.

Also, if the personal representatives do pass assets to the partner leaving the estate unable to settle the debts then the partner may indeed be chased - it's a remedy called "tracing". Plus, of course, the personal representatives may be liable to the creditors...

Thank you for your reply. Just to make this VERY CLEAR, i only have total debt in my name of around 7,000. I was not asking "how to dump my debts". Did not want my few creditors to be able to make my hubby sell the house to pay these as there is life insurance (i may have a very long life, and then this wont be a problem as i will have cleared these, and do not intend to take anymore on). If i die then my hubby will use the 50,000 life insurance to reduce the secured debt in half, so that he can make all outgoings,council tax, water rates,gas/electric etc each month comfortably.Dont think the creditors can enter into a agreement for lower monthly payments with him as the account holder is deceased?.I have no assets, only 50% of a house that is in negative equity.I am just thinking in front and want my hubby to not have to worry after i am gone, want to put my affairs in order now while i have the chance.

amersall

McKneff wrote: »

You really should make wills.

All we have to will is the house that is in negative equity and a car.

amersall

lisyloo wrote: »

In general I'd agree.
But in this case what is the value?
Two married people with few assets.
The intestacy laws should be perfectly adequate in this case.

Thank you.

amersall

HappyMJ wrote: »

Why don't you get your husband to take out another life policy on your life so that he gets more than £50k in the untimely event of your demise?

Thanks, i have done this, i took one out after my first post on here. Hopefully, i will live long enough to clear my few debts and then my hubby will get this extra insurance.

amersall

lisyloo wrote: »

I was going to suggest that too.
Life insurance is pretty cheap (as the risk is low if you are young) unless you have any significant health issue.

I have done this, i am 51 and in good health, managed to get a policy that did not cost an arm and a leg.£20,000 for 20 years from tesco for £15.71, well worth it to put my mind at rest.Had to take longer term to reduce the monthly premium.

amersall

maureen_04 wrote: »

Lisy Loo; I was not passing judgement on anyone, but was actually referring to small debts such as utilities and similar. Not massive loans and the like.

Seldon; I think it really depends on how much money is involved. I have heard of cases where debts have been ignored and an estate of less than £15k being distributed between family members as probate was not required nothing was mentioned about debts. The debtors were just told that nothing was left so they got nothing.
There is no legal right of any debt agency or creditor to chase anyone other than the person who owed the money. The only exceptions are if you are a guarantor, or the debt is in joint names. No court in the land would force a spouse to pay their partners debt.

Thanks for your reply, that has given me an insight!,but i could not do that,nor could my hubby that is not our nature..Dont think anyone thought you were passing judgment, i certainly did not. Thankfully we are up to date with all payments, i really shouldnt be thinking about how my hubby will cope when i am gone, but that is the way i am, i could just think "so what" i wont be here to see what will happen, but at least i will leave him a bit comfortable.