Settling debts?

Daffs_2

Hi,

My mum passed away a few days ago. Although she had been diagnosed with terminal cancer, her death was sudden and she hadn't yet had time to make a will. As she and her partner weren't married, as eldest child I have taken responsibility for sorting out her finances.

My mum was absolutely terrible with money and was the first to admit it! I have found from sifting through her paperwork that she had outstanding balances on credit cards, and a loan. I have no idea what's in her bank account yet but I'm hoping there will be enough to cover her funeral.

My mum's home is entirely owned by her partner so there is no property involved. I understand that after we have paid for her funeral, anything left in her bank account should go towards settling her debts. My question is that if I tell the creditors there was nothing left after paying for the funeral, how would they know any different?

I am not trying to get out of paying her debts as such (or rather I am, but not for any personal benefit!) The problem I have is that I have agreed that anything left from her account will go to her partner. My brother and I will benefit from a 'death in service' award from her employer, and I didn't think it fair for him to get nothing. However, they had separate accounts and he did not agree with having credit - thus, he knows nothing about my mum's debts! I know she'd be mortified if he found out, and if I have to use what's left of her money to pay her debts, how to I explain it to him?! Any advice welcome.

BobQ

You cannot just do as you please.

If there is no Will (are you sure) strictly you should apply for Letters of Administration (which is like a Grant of Probate) authorising you to deal with her affairs. If her affairs are simple and the financial institutions are willing to deal with you directly without a Grant of Administration they will still require you to provide evidence of anything you say.

You must collect any money she has from all sources and pay her funeral expenses (which must be reasonable). If her bank accounts contain money you cannot hand it to her partner, you have to settle her debts or reach a settlement with her creditors and they will expect you to demonstrate that she did not have assets (so will expect to see any bank accounts).

Of course you can lie to her creditors but if she has a credit card, she has a credit record and a creditor could write to her bank and find out. They might not bother but if they do, you could be prosecuted for any false statements you make particularly if there is money to pay some or part of her debts.

You mentioned a death in service payment. If she signed a nomination form leaving the payment to specific people then the trustees of the pension fund can choose to follow her wishes. If she did not sign a nomination form the money will probably be paid to her estate and creditors are entitled to be paid from it.

Daffs_2

Thanks for the advice. I don't intend on doing what I want. What I want is my mum not to have died so young, or the added stress of sorting her finances out with no help because I can't involve her partner. No, there's definitely not a will.

I have been looking up 'letters of administration' on the Citizens Advice site. It says if the value of her estate is only small (under £5000) I don't need it. How am I supposed to know the value of her estate if I can't deal with anything with no letter of administration?! I've also had another thought - what happens to the car? It was bought between her and her partner but I think she's registered owner.

I did wonder about the death in service payment, but it's a discretionary payment directly to the nominee (me). A very recent thread on here seems to confirm it shouldn't be classed as part of her estate.

Forgive me here, I'd like to think I'm pretty intelligent and I'm sure I can muddle my way through this, but I've not got a clue what I'm doing!!

dzug1

Daffs wrote: »

I have been looking up 'letters of administration' on the Citizens Advice site. It says if the value of her estate is only small (under £5000) I don't need it. How am I supposed to know the value of her estate if I can't deal with anything with no letter of administration?! I've also had another thought - what happens to the car? It was bought between her and her partner but I think she's registered owner.

You write to each institution with an official copy of the death certificate and ask for the value at the date of death.


The car (or half its value) is potentially part of the estate. Check that it's still insured - if the insurance was in her name it won't be.


It's a two stage process - gather information. Then apply for Letters of Administration (or come to the conclusion you don't need them)


Only then can you actually collect in the money, settle debts and pay out anything that's left.

Crabapple

As the others have said, you need to gather the information. Write to all banks, building societies and to the credit cards. Basically any financial institutions she had accounts with.

When you write for information about credit cards or loans specifically ask if there was any insurance in place to repay the debt.

When the answers come in you will know whether you need to apply for a grant, and whether there are enough funds to settle debts.

At that point, if there are insufficient funds to pay the debts you have two options:-

1. Explain to the partner that there were credit cards and that they have to be repaid from the money in the estate.

2. Don't tell him and settle the debts as far as you can from the funds you have received. So if you have £2k in the estate and decide to pass it to the partner anyway you will need to spend £2k of your own money.

Note that the funeral is the priority debt so that gets paid before any credit cards etc are repaid. If there is less money than owed you divide it in proportion between the cards.

Crabapple

Just rethinking this and to clarify:-

The money you have received is not part of the estate and does not have to be used to repay any debts, only money left in bank accounts and any other assets in her sole name do.

However, if you want to try and keep the credit secret that's pretty much your only legal option. You would need to show to creditors how much was in the estate for debt repayment and that they have received their fair share of it.

Be aware that the creditors will at this stage still be sending statements to your mother's address, so her partner may find out anyway.

Mojisola

Daffs wrote: »

I am not trying to get out of paying her debts as such (or rather I am, but not for any personal benefit!)

The problem I have is that I have agreed that anything left from her account will go to her partner.

My brother and I will benefit from a 'death in service' award from her employer, and I didn't think it fair for him to get nothing.

However, they had separate accounts and he did not agree with having credit - thus, he knows nothing about my mum's debts! I know she'd be mortified if he found out, and if I have to use what's left of her money to pay her debts, how to I explain it to him?! Any advice welcome.

You could use the money you are getting from her employer to pay her debts.

theoretica

I am sorry for your loss - both yours and her partner's. If you read the boards here there are many stories of people reluctant to tell their partners of their debts, but who do it anyway and it turns out OK. I am sure that this will be the same and her partner will be far more concerned about the loss of your mum than the debts.

If after everything is settled you and/or your brother feel it would be fair to make a gift to her partner from the money you get as death in service benefit that is a separate matter for your generosity.

BobQ

Daffs wrote: »

Thanks for the advice. I don't intend on doing what I want. What I want is my mum not to have died so young, or the added stress of sorting her finances out with no help because I can't involve her partner. No, there's definitely not a will.

It is never easy to deal with a loved one's affairs. Sorry if my original post did not allow for your personal reaction to her passing.

I have been looking up 'letters of administration' on the Citizens Advice site. It says if the value of her estate is only small (under £5000) I don't need it. How am I supposed to know the value of her estate if I can't deal with anything with no letter of administration?! I've also had another thought - what happens to the car? It was bought between her and her partner but I think she's registered owner.

Its is true that Letters of Administration (sometimes called Grant of Representation) only needs to be applied for if required and for many small estates the financial institutions will not require one (you will be asked to sign a letter of indemnity instead promising to pay them back if you have given false information). At present you are just asking questions about what she had exactly of my making reasonable estimates (like of the car). Same thing with debts. Its only if someone refuses to deal with you without a Grant of Administration that you might need to apply for one.

Re the car, strictly she was the registered keeper not the registered owner. Provided her partner has evidence that they bought it together, its joint property so becomes his.

Also do not forget any life insurance policies.

I did wonder about the death in service payment, but it's a discretionary payment directly to the nominee (me). A very recent thread on here seems to confirm it shouldn't be classed as part of her estate.

Correct, its part of her pension and if you are the nominee they will view this as her wish. You can do what you please with it and an creditors cannot do anything about it. I only asked because some people do not sign a nomination form.

Forgive me here, I'd like to think I'm pretty intelligent and I'm sure I can muddle my way through this, but I've not got a clue what I'm doing!!

None of us do when faced with this the first time. If your Mum's debts are more than the what she has left after funeral expenses it will be very simple. You will just have to show the creditors her bank statement and they will realise there is nothing to fight about unless they can prove she had other assets.

I was just trying to make you aware that if there was say £5k in her bank(s) and her debts were £3K, it would be unwise to tell creditors there was nothing left for them. If she had a load of uninsured jewellery you are right they would never kno.

Good luck sorting things out.

Daffs_2

BobQ - thanks very much for your comprehensive advice and sorry about my reaction to your original reply, I am over sensitive at the minute and I realise you were trying to help!

As it turns out, she had paid for insurance on the larger loan and credit card which is a huge relief! The others are small amounts to pay day loan companies which I'm hoping we'll have enough to settle - so thankfully I won't have to go down the line of selling her car etc. Although it's not ideal that she hid her debts from her partner, I'm so pleased that she was responsible enough to ensure none of us wre left with the aftermath. You'll realise from my original post that I wasn't expecting that and I feel bad for doing her a disservice!

My brother and I have decided to gift the car to her partner rather than sell it and split the assets. We have also decided to give him a 3rd of whatever payment is to come from her employer. We feel it's only fair as just because they weren't married and he isn't our dad doesn't mean he shouldn't get anything.

RAS

Daffs wrote: »

My brother and I have decided to gift the car to her partner rather than sell it and split the assets. We have also decided to give him a 3rd of whatever payment is to come from her employer. We feel it's only fair as just because they weren't married and he isn't our dad doesn't mean he shouldn't get anything.

Hi

That is really lovely of you both and I fully support the sentiment.

Do however before you speak to her partner check the rules on the deprivation of assets.

If either yourself or your brother are in receipt of means-tested benefits you need to find out whether you are allowed to give away capital. For some benefits the limit is £6K and some £16K and some have no limit (depending on age etc).

If the PTB discovered that you gave away money they would make you pay back the benefits you received and going forward might assess you as still having the money you gave away.

So please get advice before you do anything.