Debt if parent dies

immoral_angeluk

heatherw_01 wrote:

She doesn't have anything of any value at all to be honest, other than that life insurance plan.

Many thanks, I feel reassured now

You are all so helpful!

What I would suggest is that she writes in her will that the life insurance plan is for funeral expenses so that there's no backlash when she's gone with the creditors stating that they can have that. Make it clear than it's for funeral expenses and they can't touch it.

magyar

oscar52 wrote:

If the plan is specifically for funeral expenses, then her creditors cannot touch it.

Hmm... not sure about that. Depends what you mean by "specifically for funeral expenses". If it's a payment plan with an undertaker (or a dedicated financial policy) then I would say it's fine.

If it's just a savings account or term life insurance and the will says "use this money for the funeral" then I believe it would be treated as an asset like any other.

One way to get round this would be for her to pay this into an account in your name. I assume this is small enough that it's within the figures (7k I think) allowed as 'gifts' per year.

sandralovescats

heatherw_01 wrote:

She doesn't have anything of any value at all to be honest, other than that life insurance plan.

Many thanks, I feel reassured now

You are all so helpful!

You need to check out that life insurance plan. If it is not specifically to pay for a funeral then any creditors CAN lay claim to it.

heatherw_01

It is with Brittanic I think, a life insurance plan so I don't think she would get back any money if she cancelled it now.

She wants it for funeral expenses but it doesn't say that is what it is for on the plan.

If she declare bankruptcy now, would all debt be written off and she could keep the plan?

immoral_angeluk

Sorry I should have added that my mum had 4 life insurance policies.. one for each of her children and one for funeral expenses. It was written in her will what each policy was for and the funeral expenses were released straight away but the children's policies had to be dealt with by a solicitor so any creditors could make a claim to them before the funds were released to us.

magyar

immoral_angeluk wrote:

What I would suggest is that she writes in her will that the life insurance plan is for funeral expenses so that there's no backlash when she's gone with the creditors stating that they can have that. Make it clear than it's for funeral expenses and they can't touch it.

Not convinced that anything you say in the will matters. If it's a financial asset then it doesn't really make any difference whether you say 'it's for the funeral' or 'it's for my son-in-law'.

Hence my comment above: if the ONLY thing you COULD do with this money is have a funeral, then it's fine. If it's something that you could change your mind on, then I'd get it out of the estate first.

-- EDIT -- ImmoralAngel, you sound like you've got more experience of this, so I'll bow to prior knowledge!

oscar52

depends on how much is currently in the plan if its only a small amount, i cant see the creditors fighting over it when they stand to gain maybe £100 - if its larger, then maybe - just ensure, in will or otherwise is for funeral costs.

heatherw_01

Well, she was paying about £8 a month in it for quite a few years now, so not sure how much wold be in there.

magyar

Average cost is about 1.5-2 thousand for a funeral. Oscar52 above makes a good point. The negative PR may well not be worth it for many companies.

sandralovescats

heatherw_01 wrote:

It is with Brittanic I think, a life insurance plan so I don't think she would get back any money if she cancelled it now.

She wants it for funeral expenses but it doesn't say that is what it is for on the plan.

If she declare bankruptcy now, would all debt be written off and she could keep the plan?

NO!! Most definitely NO!

The OR will take ALL INSURANCE POLICIES irrespective of their value!! The OR usually allows you to buy them back at one year's premium - per policy.

The debts would be written off, yes!