Credit Card Debt and Death

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A member of my family is sadly terminal and due to pass away soon. As horrible as it is we are having to think about dealing with the financial affairs.
I have a question with regards to this. The estate is small, very little cash but two life insurance policies worth about £8k. These have been left in a will along with all other assets (very little personal posessions) to her children.
The question is this person also has a £15k credit card debt. Can I ask
1. Is anyone liable for this debt?
2. If the above answer is no, since the assets have been left in a will to the children do the assets have to be used to pay down this debt or are they free to be passed on as per stated in the will and since credit cards are unsecured then the card company will need to bear this?

Thanks for help.
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  • dunstonh
    dunstonh Posts: 116,623 Forumite
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    1. Is anyone liable for this debt?

    no. If the assets are not sufficient to cover the liabilities in the estate then the debt cannot be passed to someone else.
    2. If the above answer is no, since the assets have been left in a will to the children do the assets have to be used to pay down this debt or are they free to be passed on as per stated in the will and since credit cards are unsecured then the card company will need to bear this?

    The assets are used to clear debts first. The Will doesnt avoid repayment of liabilities. If there are no value in the estate after clearing the debts then there is nothing to distribute and the Will largely becomes irrelevant.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • dzug1
    dzug1 Posts: 13,535 Forumite
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    A member of my family is sadly terminal and due to pass away soon. As horrible as it is we are having to think about dealing with the financial affairs.
    I have a question with regards to this. The estate is small, very little cash but two life insurance policies worth about £8k. These have been left in a will along with all other assets (very little personal posessions) to her children.
    The question is this person also has a £15k credit card debt. Can I ask
    1. Is anyone liable for this debt?
    2. If the above answer is no, since the assets have been left in a will to the children do the assets have to be used to pay down this debt or are they free to be passed on as per stated in the will and since credit cards are unsecured then the card company will need to bear this?

    Thanks for help.

    The estate of the deceased is liable for the debt.

    In the circumstances the children will get nothing. The assets have to be used to pay the debt. There may be higher priority debts (eg admin expenses, funeral bill) that have to be paid first. The CC company will thus get only part of its money
  • bengal-stripe
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    The debts will fall to the estate.

    After funeral expenses the estate will pay the debts (taxman first).
    What is left will go to the heirs. If nothing is left, the heirs won’t get anything.
  • Hax
    Hax Posts: 890 Forumite
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    Did they have PPI on the credit card(s)?
    My posts are my own opinions based on my experiences and info gathered from sites such as this.
    They are not a substitute for professional financial advice - but you knew that already didn't you? ;)
    VSP 2011 - Member #25 - Started 6th December 2010 - Total As Of 4th May 2011 (21 weeks in!) - £323.67/£500 - So far so good!
  • theonlyone12
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    Hax wrote: »
    Did they have PPI on the credit card(s)?

    Thanks for the replies.

    As far as I am aware, no.
    Is it worth them taking it out now?
  • Typhoon2000
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    Thanks for the replies.

    As far as I am aware, no.
    Is it worth them taking it out now?

    Er, no. Definately dont take it out now.
  • dzug1
    dzug1 Posts: 13,535 Forumite
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    Thanks for the replies.

    As far as I am aware, no.
    Is it worth them taking it out now?

    Too late now - you can't insure against something that has already happened.
  • theonlyone12
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    dzug1 wrote: »
    Too late now - you can't insure against something that has already happened.

    She hasn't died yet. But it is likely to be in coming days/weeks.
  • Degenerate
    Degenerate Posts: 2,166 Forumite
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    I beg to differ from the above interpretations.
    The estate is small, very little cash but two life insurance policies worth about £8k. These have been left in a will along with all other assets (very little personal posessions) to her children.

    A life insurance policy isn't an asset that forms part of the estate, it's a contract to pay out an agreed sum to a named beneficiary in the event of the insured person's death. The policies should not have been "left in a will", to anyone, they should have been named as beneficiaries in the contracts, which would then be fulfilled by direct payouts having nothing to do with the deceased's estate.

    If no beneficiary is named then the payouts most likely will default to the estate and be swallowed up by the creditors. Hopefully your ailing relative named the appropriate people at the onset of the policies. If not, then I hope that they are still functional enough to take the action that is urgently required now.
  • dunstonh
    dunstonh Posts: 116,623 Forumite
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    life insurance policy isn't an asset that forms part of the estate, it's a contract to pay out an agreed sum to a named beneficiary in the event of the insured person's death.

    Potentially it can be either.

    If the policy is set up as single life, single owner and not in trust then the policy pays out into the estate. If it is in trust or has a different owner then it will be paid out to them. Most policies are not placed in trust so would form part of the estate.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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