Father died, pension paid to children..

The_Big_H

Hi, hoping someone can enlighten me as I'm getting varying advice.

My father died in January unfortunately, intestate and in debt. He was divorced so no widow, and myself and my brother are his next of kin. We are administering his estate and have applied for a grant of letter of administration.

No assets other than a car. His flat was rented and he had nothing worth anything of note.
He had credit cards, loans and an overdraft amounting to around 20k. His car was worth 2k. At this point, we have offered to settle his debts at the rate of 10p in the pound.

Now here's the interesting bit - my dad's pension companies have agreed to make a discretionary payment directly to myself and my brother for his contributions held in trust - as he hadn't reached retirement age and hadn't drawn on them.
Also, he had a death in service benefit, and again they have agreed to make payment directly to us, on a discretionary basis.

I am informed that payments from trust, on a discretionary basis, are NOT part of the estate of the deceased.

I am adamant therefore that we do not have to pay the debts off at anything more than 10p in the pound - even this is generous as the funeral costs were more than the money we will raise from the sale of his car. If anything, we could claim the estate is insolvent.

One card company - Tesco - has replied saying that because we are being paid this discretionary payment from trust for his pensions, then we are liable to settle the WHOLE of the credit card debt.

I cannot for the life of me understand this. As the payments from trust are at the discretion of the company paying them, and technically they could decide to pay the money or not - then how can Tesco claim this is part of my dad's estate and demand full settlement?

We will soon have a letter of administration stating that the estate is insolvent. Surely this is enough to tell Tesco and the others that we cannot pay them anything?

It's very confusing and so far I have resisted legal advice due to the cost.

If anybody can shed any light from a knowledgeable point of view, I would be very very grateful.

CLAPTON

why are you paying 10p in the pound... the debts aren't yours

how do tesco know anything about the pension payments

The_Big_H

CLAPTON wrote: »

why are you paying 10p in the pound... the debts aren't yours

how do tesco know anything about the pension payments

This is all to do with my brother.
He wrote to all the card companies and offered them 10% to settle, as a gesture of good will.
Tesco have replied with a form asking for details of all monies due into the estate, including pensions and all debts including funeral costs.

When my brother told me this, I told him not to include the discretionary payments from trust - they do not count towards my father's estate.

So my brother rang them to explain. He tells me Tesco say because the pension WOULD have been drawn by my dad once he retired, then it does count and needs to be included as my dad's assets and therefore we have to settle in full.

I have told my brother not to pay them anything until we have the letter of administration. I need clarification that we are not liable.

bendix

I was always under the impression that pension amounts are paid into a trust upon death and then outstanding debts are settled from that trust, and that the balance is then distributed to those in the will or nearest of kin (if intestate).

RichandJ

This is the Revenue's view with particular reference to Inheritance Tax :

http://www.hmrc.gov.uk/manuals/ihtmanual/IHTM17053.htm

I'd be inclined to tell the card companies/other creditors to take a hike, the Estate is insolvent, there's nothing left, the discretionary payments are nothing to do with them.

The_Big_H

bendix wrote: »

I was always under the impression that pension amounts are paid into a trust upon death and then outstanding debts are settled from that trust, and that the balance is then distributed to those in the will or nearest of kin (if intestate).

Hi Bendix, that's if there is an estate. If there were saleable assets eg a house, insurance policies, shares, cash - then that would form the estate. Debtors would be paid from the estate and then the remainder distributed between the beneficiaries.

As pensions are held in trust, they do not form part of the estate. It's this bit that seems to be confusing my brother, who wants to settle everything in full so it seems, and the card companies who also want settling in full.

The estate is insolvent, bar a £2,000 car. We are offering to pay 10% of the total debts by using the sale of the car - my dad's one and only asset.

molerat

The estate pays for the funeral costs so that takes care of the value of the car. Tell the creditors there are no assets, do not offer them anything. Speak to your local CAB for more advice.

purple_haze

Tesco are trying it on.Discretionary payments from pension trustees do not form part of the estate. Funeral costs are payable in priority to other debts so if the car sale proceeds only covered the funeral then the estate is insolvent.

margaretclare

You do not have to settle another person's debts, not even those of your late lamented Dad!

'Gesture of goodwill' my left elbow. Given the huge profits that a company like Tesco is making, and the other card providers, they won't even notice your 10%. It won't earn you any brownie points in heaven or even on earth!! Do you think that a grocery business has gone into the credit card/banking sphere for the good of its health, or without knowing quite well that there will be losses as well as huge gains. That's part of the risk they take.

The first thing to come out of your Dad's 'estate', if there had been one, would be his funeral costs. Who's paying for them? Not Tesco, that's for sure!

JOHNNY_LOVES_JAZZ

Don't pay Tesco a penny,like others have said they are trying it on.

The_Big_H

Thanks. I have also spoken to a local probate lawyer who says the same thing. She suggested I write to all the card/loan companies revoking our previous 10% offer, and stating that the estate is insolvent and we will not be settling.

I have told this to my brother who has agreed not to do anything else!

EDIT: I have found that my dad also had an over 50 scheme with Halifax that will pay out a few k upon his death. Would anyone here know if this does count towards his estate? If it does, then this money effectively would then be used to pay part of his debts.