Liable for parents' debt

reformedspender

Hi,

My parents have acquired enormous debt, virtually all on credit cards. I know this sounds awful but I wonder if there is any liability on my part? Would me and my siblings be responsible for that debt if my parents died or would it disappear? I always assumed you were not responsible for debt that wasn't in your name. Neither me or my siblings live at the same address as my parents.

Thanks.
RS

chevalier

I don't think you would be liable BUT, I believe certain creditors can ask to be repaid from the estate of your parents. So though you wouldn't have to pay it back directly, you would indirectly because the money coming to you from there estate would be less.
Someone with more definite knowledge will be a long shortly
chev

AGB863

Basically you are not responsible for your parents debt as it stands.

If your parents were to die (and I hope you are not planning on bumping them off!) the debt would become part of their estate and if there are enough funds in the estate to pay the debts, that has to be used to clear the accounts.

If their are inssuficient funds to pay the debts off, the debt dies with them.

rayday2

This is the exact worry we have with hubbys mother, she is in a right mess but won't look at improving things. Apparently some companies if the estate does not cover it may try to make out you have to pay but if you know your rights they don't stand a chance. They basically try it on in the hope they get a bit of it!

poppy10_2

They should transfer all the assets they can to you and your siblings. Otherwise they will be used up to pay off the debts when they die. Assuming they live for 7 years after they transfer the assets to you, then the debtors can't touch the assets they have given you, and the remaining debt will die with them.

rog2

You have NO responsibility for the debts of your parents - but Poppy's advice is excellent, and would stop creditors from trying to put a 'charge' on your parents' property.

Dr_Hook

poppy10 wrote: »

They should transfer all the assets they can to you and your siblings. Otherwise they will be used up to pay off the debts when they die. Assuming they live for 7 years after they transfer the assets to you, then the debtors can't touch the assets they have given you, and the remaining debt will die with them.

...and they don't become formally insolvent within 5 years - this would be a voidable transaction in bankruptcy.

Not sure what (if any) the tax implications of doing this would be either

sammiboo

Dr_Hook wrote: »

Not sure what (if any) the tax implications of doing this would be either

As far as i know there wont be any. My grandmothers house is in my dads name. She isnt in any debt I think this was done just before she divorced my grandad.

Just legal stuff to fill in and when she dies my dad wont incur inherietance tax on the property as its already his and she just happens to be living there rent free....

disgruntledpuppy

sammiboo wrote: »

As far as i know there wont be any. My grandmothers house is in my dads name. She isnt in any debt I think this was done just before she divorced my grandad.

Just legal stuff to fill in and when she dies my dad wont incur inherietance tax on the property as its already his and she just happens to be living there rent free....

Actually, that's not the case. The principle of Gifts With Reservation of Benefit means that if she has gifted the property to your father and continued to live there rent free, the property will never pass out of her estate for IHT purposes even if she lives for thirty years. It will only stop counting for IHT purposes if she moves out or starts paying a market rent (which will have income tax implications for your dad) and survives 7 years from that date. In addition, your dad's acquistion value will be the value when the property was first transferred to him for capital gains tax purposes (presuming he is not living there). He won't get the capital gains uplift on death and potentially could end up paying far more tax if the property is over the IHT threshold. Proper legal advice should be taken from a specialist before entering into any tax mitigation schemes.

rayday2

We tried to wake MIL up to her wrong ways by asking to be written out of her will but it never worked.

She has already done the damage and downsized after running up debts and getting a mortgage on a mortgage free property, now in that downsized property she has run up debts again so took out an equity release she won't tell us which one but his sister had to sign somethign to say on her death she would move out and she got a lump sum. Still she has run further debts up but now has no equity. She has no life insurance and won't be able to afford it because earlier this year she ended up in Intensive Care and was left with a cronic lung condition.

Sometimes, parents money and property can be a minefield!

sammiboo

can i just point out that this was 35-40 years ago and was done through my dad solicitor and his mums solicitor. I dont know the ins and outs of it cos it was a few years before i born