Bank taken arrears from life insurance

crazygal_2

Hi

My mother in law passed away two weeks ago. We claimed the life insurance which was paid into her joint account with my father in law - they had since spilt up and this account was closed unbeknown to my brother inlaw when completing the form. (They had got back together before she died).

The bank automatically paid it into the next available account which was my father in laws in his own name. We have since found out that my father in law was in arrears on a loan and the bank have take the whole amount of life insurance to part pay the arrears.

The life insurance was part of my mother in laws estate and was going to be used against the funeral costs but now the bank have taken it as it was in his personal account!! Are they allowed to do this as i thought that all money from the estate settle the funeral costs and any debts of the deceased and then anything left over (which there would not be) would go to the next of kin i.e. my father in law.

The debt was nothing to do with her and was soley his so surely they cannot take this money??

Doea anyone have any thoughts on this please

Thanks

Tixy

Did the forms state specifically the account number it should be paid into? And this was a closed account?

You say the bank paid it to the next available account - this is the bank that it should have been paid into? and the 2 accounts were the same bank?
And the same bank then took the money to offset the funds?

What have they said when FIL contacted them to explain the situation?

If he has had no luck by phone then I would write to them to stating that the money should not have been paid into that account as it was not the designated account.
And that the funds form part of MIL's estate and they should return it to the account immediateky so that it can be then returned to the estate.

crazygal_2

Tixy wrote: »

Did the forms state specifically the account number it should be paid into? And this was a closed account? Yes unfortunately it was a closed account that he had quoted although we did not know that at the time

You say the bank paid it to the next available account - this is the bank that it should have been paid into? and the 2 accounts were the same bank? Yes it was then paid into the correct account as he was the next of kin and had to be paid to him but we were unaware that he had arrears and that they would take this money
And the same bank then took the money to offset the funds? Yes thats correct

What have they said when FIL contacted them to explain the situation? We have only found out tonight - he is going to contact bank tomorrow

If he has had no luck by phone then I would write to them to stating that the money should not have been paid into that account as it was not the designated account. The designated account was closed so the account we should have used is the right one that they eventually paid it into


And that the funds form part of MIL's estate and they should return it to the account immediateky so that it can be then returned to the estate.

Thanks for the quick response i hope i have made sense

opinions4u

Insist that the bank return the funds immediately (assuming they do form part if the estate).

BCOBS section 4 and 5 require them to comply with such a request.

4.1.4

5.1.3

InsideInsurance

If they were split up but not divorced doesnt this cause complications to the whole matter? Did your MIL have a will or not?

crazygal_2

They never divorced (proceedings were started but never followed through) and then they got back together a year before she passed away so no problem there.

She never made a will and the estate is only worth approx £4000 and the funeral (a burial) was £4700. She had no personal debts.

antrobus

So basically it's this; your father-in-law has received some money that you think is part of your mother-in-law's estate, but your father-in-law hasn't got the money any more because his bank have taken it to pay its debts.

I don't think the bank has done anything wrong. It's simply exercised its right of set off. I don't think banks are under any duty to inquire as to whether or not any funds that arrive in any customer's account might be beneficially owned by a third parties. And if the father-in-law was the named beneficiary of his wife's life insurance policy, then it's his money anyway and nothing to do with the estate.

That's not to say that 'complaining' to the bank concerned might not produce a result, but I doubt whether the law would help you that much.

InsideInsurance

I am not an expert on inheritance law at all but my very very vague understanding was that if she was married when she died intestate then monies, like the life insurance, passes straight to her husband and does not form part of the "estate" and thus the pecking order of funeral, HMRC, secure debt, unsecured debt doesnt apply to it but I certainly could be wrong

Was there a beneficiary named on the insurance?

antrobus

InsideInsurance wrote: »

I am not an expert on inheritance law at all but my very very vague understanding was that if she was married when she died intestate then monies, like the life insurance, passes straight to her husband and does not form part of the "estate" and thus the pecking order of funeral, HMRC, secure debt, unsecured debt doesnt apply to it but I certainly could be wrong

Well yes. In this case it's clear that the husband (FIL) would be the sole beneficiary, whilst it doesn't appear that the wife (MIL) had any assets, so there's no point in applying for letters of administration, so in that sense there is no 'estate' and thus any question of prorities are moot.

InsideInsurance wrote: »

Was there a beneficiary named on the insurance?

If the husband (FIL) was so-named then it would be straightforward. I'd assume that was the case, simply because that's who the insurance company paid the money to. (I don't know enough about insurance to be categorical on that point.)

InsideInsurance

By the original post it states that another relative completed a form giving the former joint bank account for MIL & FIL "in error" and the bank passed the money to through the FIL existing account to FILs overdue debts

antrobus

InsideInsurance wrote: »

By the original post it states that another relative completed a form giving the former joint bank account for MIL & FIL "in error" and the bank passed the money to through the FIL existing account to FILs overdue debts

Yes, but subsequently (see post #3) OP stated:-

Yes it was then paid into the correct account as he was the next of kin and had to be paid to him but we were unaware that he had arrears and that they would take this money

I therefore concluded that the whole 'wrong account' saga was a red herring; it was intended all along that FIL should receive the money. And re-reading it, the phrase "had to be paid to him" sticks out, and would imply to me that he was indeed the named beneficiary of the policy.