Life insurace to pay off debt ?

FFCPaul

Hi all,

Apologies if this has been asked before, but I'm new to the forum so be patient with me !

My mum passed away last Saturday (4th) and un-beknown to us had racked up nearly £9,000 in personal (credit card, loan etc) debt. She had arranged a payment plan with Step Change (charity), to pay off the debt monthly. We have since found out that mum also has a life insurance policy, which will pay out £25,000.

So my question is, am I (legally) bound to pay the £9,000 debt off through the life insurance money ? Do I have to inform Step Change that the life insurnace policy exists ? There is no will and mum has no assets (lived in sheltered accomodation, with mininal furniture), apart from a car.

Once again, sorry if this has already been asked and hope someone can help

Thanks in advance

Paul

HappyMJ

FFCPaul wrote: »

Hi all,

Apologies if this has been asked before, but I'm new to the forum so be patient with me !

My mum passed away last Saturday (4th) and un-beknown to us had racked up nearly £9,000 in personal (credit card, loan etc) debt. She had arranged a payment plan with Step Change (charity), to pay off the debt monthly. We have since found out that mum also has a life insurance policy, which will pay out £25,000.

So my question is, am I (legally) bound to pay the £9,000 debt off through the life insurance money ? Do I have to inform Step Change that the life insurnace policy exists ? There is no will and mum has no assets (lived in sheltered accomodation, with mininal furniture), apart from a car.

Once again, sorry if this has already been asked and hope someone can help

Thanks in advance

Paul

The insurance pays the money into the estate. The estate clears the debts and distributes the rest so yes the debt will have to be paid. You're not paying it...the estate is.

Savvy_Sue

HappyMJ wrote: »

The insurance pays the money into the estate. The estate clears the debts and distributes the rest so yes the debt will have to be paid. You're not paying it...the estate is.

Actually, it depends on how the life insurance policy was written. If it was 'in trust' to the OP or A.N.Other, then it probably passes outside the estate and no, in that situation you don't have to inform Step Change and pay the debt off.

Whether you SHOULD is another matter.

Mind you, as a charity doing sterling work with those in debt, I'd like to think you'd make a donation to them ...

G6JNS

FFCPaul wrote: »

Hi all,

Apologies if this has been asked before, but I'm new to the forum so be patient with me !

My mum passed away last Saturday (4th) and un-beknown to us had racked up nearly £9,000 in personal (credit card, loan etc) debt. She had arranged a payment plan with Step Change (charity), to pay off the debt monthly. We have since found out that mum also has a life insurance policy, which will pay out £25,000.

So my question is, am I (legally) bound to pay the £9,000 debt off through the life insurance money ? Do I have to inform Step Change that the life insurnace policy exists ? There is no will and mum has no assets (lived in sheltered accomodation, with mininal furniture), apart from a car.

Once again, sorry if this has already been asked and hope someone can help

Thanks in advance

Paul

If the proceeds of the policy are due to the estate then whoever administers the estate is legally obliged to pay the debts. Somebody will need to apply for letters of administration to do this. If the policy is payable to someone else then you should be very careful that you do not get involved in administration as the estate appears to be insolvent.