If I die?

Zulu_Dawn

I have huge unsecured debts as a result of a fairly dramatic gambling addiction.

I also have an equivalent amount of equity in a property owned jointly with my wife.

My wife is very worried that if I die, they would want my bit of equity. My understanding is that we are joint tenants so if anything happened to me, she would get the house less the mortgage but the equity would be hers.

Can anyone enlighten me? I don't really have any other assets.


Many thanks,

ZD

PS I'm not planning on dying any time soon. I just want to reassure my better half;)

immoral_angeluk

IF the worst were to happen then any outstanding debts would be paid out of your estate. So yes if you died they would expect you to sell the house or any other assests to pay the debt and as far as I know your wife would be given what was left over. Assests includes life insurance policies as well.
I'm not sure if she'd have to sell the house straight away though..

Hapless_2

Debt do not die with the debtor, the money would be reclaimed from your estate. That may involve selling the house. There would also be things like funeral expenses. Have got life insurance/assurance to cover such an event? Are your loans insured? More importantly have you made a will?

immoral_angeluk

Forgot to mention that with life insurances funeral expenses are paid BEFORE any creditors get their share.

chevalier

I echo what the others have said. But I think a call to the CAB may be in order too. It would also depend on whether you are joint tenants or tenants in common. If the latter than it may be better from a debt point of view.

Are you now in a position to start dealing with these debts? Can we help you with that?
chev

Dithering_Dad

Here's an article on this very question:

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/10/14/cmcottell14.xml

The case study is especially applicable. If I were you I would look into getting some life assurance to cover the amount of debt you owe so that if the worst happens, then at least the debt is paid off and your wife will not have to deal with debt as well as grief.

Zulu_Dawn

Having read the article (for which thank you), I'm not really sure any of you are right.

My mortgage is a joint tenancy. Therefore my understanding is that on death, our house becomes the asset of my joint tenant - my wife - and is no longer part of my estate.

Our mortgage is secured on the house and so that debt goes with the house to my wife. I therefore need to ensure I have life protection to clear that in the event of my death.

My unsecured debts are mainly credit cards and unsecured loans. In the event of my death, my wife now owns the house and my estate has little or no assets. Therefore these debts simply die with me, particularly as they arise as a result of my gambling, something my wife had no knowledge of.

Am I correct?

Zulu_Dawn

I've done a bit more digging. Apparently I can get life assurance and put it in some kind of trust so that if I die it pays off the mortgage rather than my unsecured creditors.

Tihs means that I may be dead and effectively bankrupt but my unsecured creditors won't get paid from the equity in my house.

Phew!

CLAPTON

The correct situation is that the house is not safe from your creditors... as the telegragh article says it is possible (even if difficult ) to get a Insolvency Administration Order even if the house was joint tentants.

In this case they could force the sale of the house and half the equity would be taken to pay the debts and the remaining half would be your wifes.

Also i would suggest you seek clarity about what life insurance written in trust actually means. It is a mechanism so that your wifes gets the money rather than having to go via probate.. it doesn't usually actually pay off the mortgage directly and even if it did, it wouldn't prevent your creditors from pursuing the debt.

One problem you will find is that loads of articles are written without precision and deal with 'normal' non debt situations, so yes normally joint tenants means that your wife gets the house 'automatically' without probate but not im afraid without the potential of your creditors claiming on the house.


Better to get sufficient life insurance to cover the mortgage and all your debts.

Andreg

Zulu, IMHO I think you are right. The house will become your wife's and will not form part of your estate. The telegraph article is vague, but if you read it carefully, it agrees with common sens - i.e. only your creditors that have lent you money secured on the house will be able to force your wife to sell. Any debts that are unsecured and in your name only will become part of your estate and will therefore have to be written off by the lenders if you have no other assets.

You need to make sure that the unsecured debts are not on joint accounts or credit cards as your wife would then be liable to repay the debt.

There is the question of whether a credit card debt from the same company as your mortgage can be lumped together and treated as secured by that lender?

Of course I have no qualification to advise you so I suggest you get proper legal advice if you think there's a significant chance of you dying soon.

danno_4

Hi Zulu,
The question you ask as posed different answers.If you were my client my advice to you would be that unsecured creditors would have no right to any monies from you estate period.Andreg is quite right with is advice.If anthing happened to you(god forbid)then the house would go to your wife,Only secured creditors secured on your property could force a sale.Hope this helps.
kindest regards
Danno