Morbid CC question !

mastapeace

Hi all,

I have a question thats a bit on the morbid side...

I have a cc and i have my son as a secondary card holder, i understand that whatever he spends on the card is my obligation and my debt. But my question is : What if i were to pass away tomorrow ( dont panic, im not quite on deaths door...hehe ) . What happens to the balance on my card ? Will my wife have to pay ? She is not a card holder. Will my son have to pay ? Or does the balance on the card get wiped....
As both my son and i have spent on the card, surely it would not be fair to burden him or my wife with the entire debt ?

Many thanks for a great site.

mastapeace :cool:

LittleVoice

Any debt on the card (whether it was your spending or his) would be paid from your estate.
If you trust your son with a card, I guess you trust him to pay up if appropriate.

oscar52

If you have no estate - no house, shares savings etc, then the debt is wiped clean. Makes no difference if you son is an AU or not.

mastapeace

oscar52 wrote: »

If you have no estate - no house, shares savings etc, then the debt is wiped clean. Makes no difference if you son is an AU or not.

Thankyou.
So would i be right in saying that if i transfered the ownership of my house which is paid for and mortgage free over to one of my other children, the house being my only asset, that would mean that if i went toes up then the credit card would be wiped as i would have no estate ?

Many thanks

mastapeace :cool:

p.s whats an 'AU' ?

CLAPTON

look at the full implications of gifting your (or is it joint ownership) house to a son ..he will own the house then.

mastapeace

CLAPTON wrote: »

look at the full implications of gifting your (or is it joint ownership) house to a son ..he will own the house then.

Yes, i know he would own the house (sole ownership) but i fail to see any 'implications' other that my ability to obtain credit based on the ownership of the house...or is that wot you ment ?

Was my theory right about the card being wiped though?

thanks

mastapeace:cool:

firespire

mastapeace wrote: »

Yes, i know he would own the house (sole ownership) but i fail to see any 'implications' other that my ability to obtain credit based on the ownership of the house...or is that wot you ment ?

Your could fall out with the family member you gifted your house too & he could sell the house & chuck you out. He could run up a debt and the house could be repossed I presume.

mastapeace

firespire wrote: »

Your could fall out with the family member you gifted your house too & he could sell the house & chuck you out. He could run up a debt and the house could be repossed I presume.

Oh my god ! Its my son im talking about..Not a hoody stood ouside the spar.!

But really, that could never happen. I have a strong family and have never and would never fall out with anyone.


Was my theory right about the card being wiped though?

:cool:

Clariman

Hi mastapeace,

You may need to seek some professional advice on this as I believe that it is more complex than you or others have noted. Firstly, if you gift anything to your children then it is known as a 'potentially exempt transfer' for tax purposes. What this means is that if you live seven years after the date of transfer, then the gift/transfer would be tax free. However if you died during those 7 years, inheritence tax would be payable on it. IIRC there is a sliding scale so that the longer you last during the 7 years then less IHT is payable.

The next thing you need to check out - and this is the bit I am not fully up on so read the Inland Revenue website or speak to a tax advisor - is that if you give your house to your kids and you continue to live in it, it is more complicated. I think that there is an element of the tax man saying "hang on a minute. You are living in a home that you used to own and now you say your kids own it so there will be no IHT payable when you die. Ahem I don't think so - we can see through that one mate".

If you check out all the above to be OK and if you live a further 7 years after transferring ownership of the house and if you have no other assets (cars, bank accounts, shares etc etc) so that your estate has a value of a big fat Zero, then the credit card debt would be written off.

As an aside, I love my son and I fully trust him, but I would never let him spend on my credit card nor would I give him my home - unless it was late in life and was part of IHT planning. Why is that? Because if my son could freely spend money on my credit card then I don't think he would learn to manage his own finances. In the long run he will be far better off if he learns to fend for himself.

Clariman

thumshie

From http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/InheritanceTaxEstatesAndTrusts/DG_10010612

web wrote:

Only 'outright gifts' count as PETs
If you make a gift with strings attached (technically known as a 'gift with reservation of benefit'), it will still count as part of your estate, no matter how long you live after making it. For example, if you give your house to your children and carry on living there without paying them a full commercial rent, the value of your house will still be liable for Inheritance Tax.

In some circumstances a gift with strings attached might give rise to an Income Tax charge on the donor based on the value of the benefit they retain. In this case the donor can choose whether to pay the Income Tax or have the gift treated as a gift with reservation.

Seek professional advice.

CLAPTON

you may well trust your son absolutely but if he were to marry then half the house may well become his wifes. if he died then the whole house would be his wifes..... that's the sort of thing i meant.

You refer to 'other' children... they would inherit nothing, is that your intention

And is the house in your sole name and not jointly with your wife?