Deferred payments for care & estates

fredsnail

If someone has received care under a deferred payments scheme and has bequethed their house to child1 should the debt against the house also go to child 1 or should it be settled along with other debts before the residue is shared out among the other bequests?

zzzLazyDaisy

It is unusual to bequeath a house to a beneficiary, and more usual to state that the house be sold and the net proceeds of sale be paid to the beneficiary.

However, if it is the house itself that is to be transferred to the beneficiary, then the beneficiary would need to be able to find the funds to pay off any charges (eg mortgage, charging orders, and charge for care) as those debts cannot be passed to the beneficiary but must be paid)

Charges against the house would only be paid by the estate if the will expressly stated that the beneficiary is to receive the property free of all debts and charges.

Edit, I think you are confusing specific gifts with residue. If the house is gifted the child 1, that is a specific gift. The residue is what is left after all debts and other gifts (including the gift of the house) have been discharged by the estate.

Just as a by the by - a beneficiary can always refuse a gift. So if the debts and charges against the house mean that there is no equity left and the only thing that the beneficiary would 'inherit' is effectively the costs of selling the house to pay the creditors, the beneficiary may choose simply to renounce the gift, in which case it would fall back into the estate.

fredsnail

Thanks for your help.

It's a self written will and as far as I'm aware the will just states that the house & contents go to a child as this person was adamant the house should remain in the family and not be sold, and money & other gifts go to the other children & grand children.

I wondered if the debt against the house would have to be repaid by the beneficiary of the house which your answer indicates it would.

The main problem is that there will not be enough money to cover the monetary gifts and if the debt against the house had to come out of the estate before the monetary gifts can be made there will be even less money to be gifted.

I'm not mentioned in this will which is fine so I've no personal gain or loss either way but wondered how it should be resolved as I'm named as one of the executors.

Errata

Simply: Debts must be paid first and what's left over goes to beneficiaries.

zygurat789

fredsnail wrote: »

.

It's a self written will and as far as I'm aware the will just states that the house & contents go to a child as this person was adamant the house should remain in the family and not be sold, and money & other gifts go to the other children & grand children.

I wondered if the debt against the house would have to be repaid by the beneficiary of the house which your answer indicates it would.

The main problem is that there will not be enough money to cover the monetary gifts and if the debt against the house had to come out of the estate before the monetary gifts can be made there will be even less money to be gifted.

.

Under a Deed of family arrangement a will can be completely redrawn, IF all the beneficiaries agree.

John_Pierpoint

Unless the will specifically says the debt secured against the house must be paid off by the estate, the beneficiary gets the house and the debt secured against it.

A lot depends on how the will has been written and the greatest problem occurs when the testator makes no mention of InHeritance Tax. When IHT is due the tax man becomes the unnamed beneficiary at the head of the queue.

The tax man will claim interest if he is not paid within 6 months of the death and other beneficiaries can in theory claim interest if they are not paid within 12 months.

The executor has to do the best he can to follow the instructions in the will.

How old is the will?

Does the beneficiary getting the house actually want to live in it?

If you put up its wording, we might be able to advise better.

Errata

John_Pierpoint wrote: »

Unless the will specifically says the debt secured against the house must be paid off by the estate, the beneficiary gets the house and the debt secured against it.

It has always been my understanding that debts can't be inherited by a beneficiary - have I misunderstood?

John_Pierpoint

If the debt secured against the house is 100,000 and the value of the house is now 99,000 the beneficiary can renounce the inheritance of the house and its 1,000 of negative equity; thus leaving the creditor to chase the executor for a share of the residuary or get an order to sell the house.

However if it is the other way round the beneficiary has not inherited a debt. In reality of course the beneficiary would continue to renounce their inheritance until the equity in the house was at least enough to pay the solicitor and the estate agent the costs of selling the property and have something left over after the creditor has been paid off.

In this specific situation is sounds as though the estate has run out of cash, in which case the beneficiaries left cash won't get anything unless the family can arrange an deal internally amongst themselves. For example the person getting the house might be elderly and agree to take it as an interest in possession (a life interest) with it returning to the executors upon the death of the beneficiary.

Meanwhile the beneficiary inheriting the "Chippendale writing desk" and the beneficiary inheriting the house can still find themselves in conflict when the residuary still does not have enough cash to pay all the creditors.

zzzLazyDaisy

OP you say it is a 'self written will'. The executors should check that the will has been properly executed as it may not even be valid. As there is property involved, the executors will have to apply for probate (if the will is valid) or letters of administration )if it is not a valid will). As has already been pointed out, it is possible to vary the will to change the gifts, if all beneficiaries agree, by a deed of variation.

Savvy_Sue

Is this an actual or a theoretical problem at the moment?

As in, are you attempting to execute a self-written will, or is the person who wrote it still alive?

And if still alive, are they mentally competent if it appears to be a big fat can of worms waiting to escape?

John_Pierpoint

zzzLazyDaisy wrote: »

OP you say it is a 'self written will'. The executors should check that the will has been properly executed as it may not even be valid. As there is property involved, the executors will have to apply for probate (if the will is valid) or letters of administration )if it is not a valid will). As has already been pointed out, it is possible to vary the will to change the gifts, if all beneficiaries agree, by a deed of variation.

If the beneficiaries affected by the change all agree.

I don't think the others even need to know?