Overdraft debt and death

danerin

Sorry if this in the wrong forum.

My father died just a few days ago. He had a life insurance policy for £3400 to cover his funeral expenses which is being paid to me as next of kin, he had no other assets. When we went to the bank we discovered he had an overdraft of around -£4000. The woman at the bank said she thinks the insurance would have to be used to pay the overdraft and the rest would be written off as there are no other assets, their bereavement department will be contacting me next week.

I have since read that funeral expenses are payable before debts, and I'm confused as to whether it means we can use the insurance policy as it was intended for funeral expenses and give the bank whatever is left, or if it will all go to the bank to cover their debt.

Any help would be greatly appreciated. Its already an incredibly difficult time and I'm stressed that we might not be able to afford his funeral.

Thanks in advance.

Mojisola

You'll get a lot of help with what needs to be done if you post on this board -
http://forums.moneysavingexpert.com/forumdisplay.php?f=217

In short, though - the money is being paid to you so it probably isn't even part of the estate. The bank will have to write off the debt.

danerin

Thank you for your quick response.

I hope you're right. I hadn't considered that as it is going to me it might not be part of the estate. Hopefully that is the case

I will post it in the correct forum now thanks.

jonesMUFCforever

If the insurance make out the cheque to you then you have nothing to worry about.
It depends whether the policy is written in trust or not.

However you are right - funeral costs come first before any other debt.

mozzy10

Depends who the policy holder of the life insurance is.

If it was your father then it will be part of the estate.
If you are the policy holder then it is yours.

magpiecottage

mozzy10 wrote: »

Depends who the policy holder of the life insurance is.

If it was your father then it will be part of the estate.
If you are the policy holder then it is yours.

This is not correct.

As jonesMUFCforever says, if the policy was in trust then it is not part of the estate and creditors of the deceased have no valid claim on it unless fraud is involved.

danerin

I don't know if it was in trust or not. When we phoned the insurance they didn't ask or state otherwise. It was an over 50's life insurance, and they were happy to pay out to next of kin. They just asked for my bank details so it could be paid direct. At this point we didn't know about the overdraft.

nwc389

I worked in a bank and dealt with bereavement , funeral costs come first and if there is anything left in the estate then debt.
The policy will be paid to you as you are paying for the funeral , keep a record of all funeral costs as anything left over should go to the overdraft .
If there is nothing else in your dad's estate then the bank will have to write off the debt .

PeacefulWaters

nwc389 wrote: »

I worked in a bank and dealt with bereavement , funeral costs come first and if there is anything left in the estate then debt.
The policy will be paid to you as you are paying for the funeral , keep a record of all funeral costs as anything left over should go to the overdraft .
If there is nothing else in your dad's estate then the bank will have to write off the debt .

Not necessarily.

If the policy proceeds are paid to the estate, then yes (assuming there are other debts that have priority and equal status).

If the policy proceeds are paid outside of the estate then that money shouldn't be used to clear the debt.

danerin

Thanks for all your responses. I am going to assume that the money will form part of his estate as I can't imagine it being held in trust. (The policy documents are with his partner, so I will need to check them when I get chance)

As long as the funeral costs can be paid from the insurance then I can relax the bank can have whatever is left!

Does anyone know if a wake afterwards could be considered as part of the funeral costs? I keep finding different views as to what can be accounted for.

PeacefulWaters

danerin wrote: »

Thanks for all your responses. I am going to assume that the money will form part of his estate as I can't imagine it being held in trust. (The policy documents are with his partner, so I will need to check them when I get chance)

As long as the funeral costs can be paid from the insurance then I can relax the bank can have whatever is left!

Does anyone know if a wake afterwards could be considered as part of the funeral costs? I keep finding different views as to what can be accounted for.

I was certainly able to offset the costs of a wake against IHT on an estate I wound up. So yes.