Death and unsecured loans

Tricky69

My father sadly passed away 4 weeks ago and he had an unsecured personal loan in his name only with Barclays for approx £9500 and also an ISA with them to pay for his funeral for approximately £3500. He did not have any further saving or life assurance policies.

My mother also has an ISA with Barclays to pay for her funeral.

A few weeks ago we went to Barclays branch and informed them of my father death and whilst in the branch my mother also spoke to the Barclays bereavement team. At this time we were informed to send the bill for the funeral, together with the death certificate to them and they would pay the bill directly to the funeral directors from my fathers ISA. Last week when my mother phone Barclays bereavement team she was informed that they offset the ISA against his unsecured personal loan and therefore no money was remaining to pay for the funeral and that my mother would have to pay the bill from her ISA!

As I understand it by law, the funeral expenses MUST be the first debt to be paid from an estate and Barclays have no rights to do this?

Any help would be appreciated as this is worrying both myself and my mother sick with worry.

Thanks in advance

RDG

An ISA is just a normal savings account but protected from tax. I cant see why the law would state that Barcleys must pay the funeral debt first if at all unless this was a specific term of the ISA type. However I maybe wrong.

If you have savings with a bank and debt they can and will take savings to cover the debt at anytime, this will definately be in their t&c's of the accounts.

EDIT: Also sorry for your loss.

CLAPTON

there is no such law; the funeral is not your father's debt even thought the HMRC will allow funeral expenses to be deducted from the value of the estate for IHT purposes.

you may be able to appeal to the bank on compassionate grounds.

are the family not able to help your mother at this time?

dzug1

On the contrary there is such a law - where an estate cannot pay its debts then funeral expenses are near the top of the pecking order.

What I'm not sure is whether Barclays are entitled to regard themselves as one creditor - ie they are owed net £6000 and hence cannot pay for the funeral - or whether they have to separate their two items and can pay for it.

RDG

dzug1 wrote: »

On the contrary there is such a law - where an estate cannot pay its debts then funeral expenses are near the top of the pecking order.

What I'm not sure is whether Barclays are entitled to regard themselves as one creditor - ie they are owed net £6000 and hence cannot pay for the funeral - or whether they have to separate their two items and can pay for it.

Im sure they can argue that they are a single entity in this situation.

That also assumes that there is no money in the estate which can be used to pay the debts.

Macca83_2

There's a pecking order when settling an estate.

Secured debts are the first to be settled. Followed by funeral expenses. Unsecured loans, utilities etc are further down the list at number 5.

Tricky69 check out the website bereavementadvice.org and search under insolvent estates. It'll lay out in priority which debts are to be settled first.

Hope this helps

ineed

Hi tricky, I'm sorry for your loss.

I didn't think the bank could do this, I thought all Debts etc had to wait until the estate was sorted out and as macca said there is an order to which things are settled. From what I've read looking into it Funerals expenses must be paid first, then Secured debt, then unsecured debt.

http://www.thewillexpert.co.uk/should-deceased-persons-estate-pay-bank-loan.html

This is where I read it.

Super_Daz

Sorry to hear the bad news

molerat

Sorry for your loss.

It all depends on whether Barclays is considered as one entity which is owed a net debt of £6000 or whether the 2 accounts are seperate entities, £3500 credit and £9500 debt. The executors need to write to Barclays, headed COMPLAINT and see what happens. They have 8 weeks to settle the complaint and if not satisfied it can be passed onto the FOS.

It may be worth phoning the FOS anyway to get their take on the situation, fore armed with their view could resolve the situation quickly. http://www.financial-ombudsman.org.uk/contact/index.html

antrobus

molerat wrote: »

Sorry for your loss.

It all depends on whether Barclays is considered as one entity which is owed a net debt of £6000 or whether the 2 accounts are seperate entities, £3500 credit and £9500 debt. The executors need to write to Barclays, headed COMPLAINT and see what happens. They have 8 weeks to settle the complaint and if not satisfied it can be passed onto the FOS.

It may be worth phoning the FOS anyway to get their take on the situation, fore armed with their view could resolve the situation quickly. http://www.financial-ombudsman.org.uk/contact/index.html

Barclays have the right of set off. End of story.

See here for the FOS take; http://www.financial-ombudsman.org.uk/publications/ombudsman-news/40/40_setoff.htm

antrobus

Tricky69 wrote: »

....

As I understand it by law, the funeral expenses MUST be the first debt to be paid from an estate and Barclays have no rights to do this?

...

Unfortunately Barclays have every right to do this. Given that your father had a personal loan with Barclays for £9500 and an ISA with them for £3500, they are perfectly entitled to claim the net £6000 from the estate. So if you like, it's only that £6000 debt that's in the estate - the £3500 ISA balance isn't in the estate, so the question of priorities doesn't arise.