Debts of deceased mother

ALOYSIUS

My mother died just before Christmas and in January I received money from her Life Assurance Policy. In February I received a letter from a solicitor representing a creditor who said that because my mother's policy did not name me as the beneficiary the money belongs to the estate and not me personally. The creditor is asking for over £5,500 for the outstanding debt.


In fact there would be no purpose in placing my name as a beneficiary of the Life Assurance policy because there is no one else in the family except me.


I have explained that I receive state benefits but that I need to draw money from the above monthly because these benefits do not cover my living expenses.


I have, reluctantly, offered to pay half the debt or pay 70% in monthly instalments but I do not want to pay anything at all.


I would be interested in any advice.

InsideInsurance

Sorry for your loss.

If the Life policy wasnt written in trust then they are correct. The policy pays out to the estate of the deceased and any debts etc must be paid out by the estate prior to dividing anything thats left over as per the will or next of kin.

It is recommended that life is written into trust as this removes it from the estate both for the consideration of Inheritance Tax and any debts.

SnowTiger

ALOYSIUS wrote: »

I have explained that I receive state benefits but that I need to draw money from the above monthly because these benefits do not cover my living expenses.

Seems odd. Millions of people have state benefits as their sole income.

What would you have done if you Mother hadn't died and left a windfall?

tberry6686

You are aware that any debts must be paid out of the estate before anything is distributed to benificaries aren't you ?

This money does not belong to you, it belongs to the estate and as such is not available for your living expenses. I strongly suggest that you get some advice on dealing with the estate as the path you appear to be on with it is likely to put you in deep trouble.

sheramber

If the policiy had named you to recieve the money it would be your income and not part of your deceased mother's estate.
The creditor would have no claim on the money.

As it did not name you the money belongs to the estate and must be used to pay all your mother's debts before you inherit anything left over.

Mojisola

ALOYSIUS wrote: »

I have explained that I receive state benefits but that I need to draw money from the above monthly because these benefits do not cover my living expenses.

If you can't manage on your income, join the Debt-free board where people will be able to give helpful advice and also try the Benefits board to make sure you're getting everything you're entitled to.

kingstreet

Similar thread from earlier;-

https://forums.moneysavingexpert.com/discussion/5194005

You need to settle the estate as Administrator if no-one else can do it and there was no will left.

The assets don't just pass to you and the debts disappear.

magpiecottage

Do you know who sold your mother the policy - and when?

If they did not recommend it was put in trust, you may have grounds for complaint against them.

There are a couple of other points to make. You are entitled to use money that is left to meet the reasonable cost of a funeral (and, I think, other expenses).

You then need to divide the remainder of the estate (not just the policy proceeds) among all creditors in proportion to how much they are owed. Only if they have all been paid off are you entitled to any surplus.

If you are saying that you are not entitled to State Benefits because you have the proceeds of this policy, you need to get back to the benefits agency and explain that it is your late mother's estate, not yours and her creditors have a prior claim.