life insurance to pay deceased debts

KITTEN8

My brother died witout making a will or namimg a beneficary on his life assurance.

The very few assets he did have have been sold to pay for some of the funeral.

He left up to £40,000 of debt.

He wasn't married and didn't have children. But he did get life insurance. (no beneficary)

Anyway we all agree the life insurance should get paid to mum. So have just filled out forms to get grant of probate (administration)

My question is once the life insurance pay out does my mother then have to pay off all his debts with this money.

kingstreet

Unless it's written in trust, a life policy value is an asset of the estate as is money in bank accounts etc. This is noted on the probate form IIRC.

The debts on the estate are also mentioned and a net value calculated which will determine if there are any Inheritance Tax liabilities.

In this case, I'd check if any of the debts you mention have any kind of insurance cover. Whoever is being named executor on the probate form should write to the creditors, tell them what's happened and ask them for details of the debt and any cover which my be attached.

Whatever debt is left afterwards will have to be met from the proceeds of the estate - ie the life policy if that is now the only asset.

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingDebt/DebtsAndArrears/DG_10013093

dunstonh

Anyway we all agree the life insurance should get paid to mum. So have just filled out forms to get grant of probate (administration)

It cant go to her like that. WIth the policy not written in trust or not being owned by someone else then the proceeds get paid into the estate.

The executor of the estate has a legal liability to ensure that the estate is distributed correctly and clearing of debts has to take place from the assets. Only after debts are cleared, if there is any surplus then the proceeds should be distributed according to the rules of intestacy. These are set by law and you dont get a choice.

Hawkeye4aneye

KITTEN8 wrote: »

My brother died witout making a will or namimg a beneficary on his life assurance.

The very few assets he did have have been sold to pay for some of the funeral.

He left up to £40,000 of debt.

He wasn't married and didn't have children. But he did get life insurance. (no beneficary)

Anyway we all agree the life insurance should get paid to mum. So have just filled out forms to get grant of probate (administration)

My question is once the life insurance pay out does my mother then have to pay off all his debts with this money.

The Rules of Intestacy means that as your brother had no wife or children then the estate passes to his mother AND father in equal shares. You mention that your mother is still alive but what about your father? (I assume he is your father as well)
To apply for a Grant then you will need to clear off the father's interest in the estate to the Probate Court's satisfaction.

The debts as mentioned have to be paid from the Insurance Policy proceeds. As a matter of interest what is the expected proceeds of the Policy. If this is less than £40,000 then the estate will be an insolvent estate and although you can reimburse any costs of obtaining the Grant you, or your mother (or father) will not see any benefit. However as you mention the other assets did not cover the whole of the funeral account then whoever paid the remainder of the bill can be reimbursed from the proceeds of the Insurance Policy.