Father's debts, how to deal with them ?

securityguy

Brit27 wrote: »

Thanks for that advice Konark.
It will be painful to lose the yacht, she is an old 70's vessel but has so much sentimental value to the family and I , it was Dad's wish that we kept her in use, which is why he passed her onto me before he became poorly.

Someone upthread described the transfer of the yacht for £1 as "deprivation of assets": it isn't (or at least, it isn't once your father had died) as deprivation of assets arises in respect of benefit claims, and there are no benefits involved here (or none that you've told us about). Giving away your assets prior to death may have inheritance tax implications, but you are perfectly entitled to dispose of assets in any way you choose up until the point at which you are subject to a bankruptcy order or otherwise forbidden from running your own affairs. The argument that a transaction made by a private individual prior to death is subject to re-examination if after death the estate is insolvent has no basis I can think of.

Yorkshireman99

securityguy wrote: »

Someone upthread described the transfer of the yacht for £1 as "deprivation of assets": it isn't (or at least, it isn't once your father had died) as deprivation of assets arises in respect of benefit claims, and there are no benefits involved here (or none that you've told us about). Giving away your assets prior to death may have inheritance tax implications, but you are perfectly entitled to dispose of assets in any way you choose up until the point at which you are subject to a bankruptcy order or otherwise forbidden from running your own affairs. The argument that a transaction made by a private individual prior to death is subject to re-examination if after death the estate is insolvent has no basis I can think of.

If, as seems likely from what the OP has said, assets were deliberately transferred with a view to avoiding the donors creditors then that is usually a criminal offense and the assets, or their value, can be recovered from the recipient. In the context used "deprivation of assets" does not always refer to benefit claims though that could be a factor as well. From what the OP has said he has colluded with his late father in an attempt to deprive the creditors of their rightful claims and has intermeddled in the estate as well. He is in deep trouble hence the suggestion he get immediate paid for legal advice.

securityguy

"If, as seems likely from what the OP has said, assets were deliberately transferred with a view to avoiding the donors creditors then that is usually a criminal offense"

I can't find any legislation around deaths, but had the father gone bankrupt after transferring the yacht for a pound to a son who didn't know the bankruptcy was pending, it would be OK. Insolvency Act 1986, S.284 ("Restrictions on dispositions of property."), specifically "(3)This section applies to the period beginning with the day of the presentation of the petition for the bankruptcy" and "(4) The preceding provisions of this section do not give a remedy against any person—
(a)in respect of any property or payment which he received before the commencement of the bankruptcy in good faith, for value and without notice that the petition had been presented, or". The test in (3) means there has to be at least the beginnings of a bankruptcy action, which there weren't, and the test in (4) - where there might be an argument about "for value" around the £1 - doesn't arise because the test in (3) isn't met.

Oh, and it's not a criminal offence. The transaction is potentially voidable, which isn't remotely the same thing. And even if it were a criminal offence, the offence would have been committed by the vendor, who is now dead. Arguments about conspiracy to defraud with the main actor being dead and the whole offence hinging on the mens rea of the deceased are hardly likely to fly in court ("did your father tell you he was in financial difficulties?" "No". "Er...")

The OP should get legal advice, for sure. But let's not start hares running.

getmore4less

securityguy wrote: »

The argument that a transaction made by a private individual prior to death is subject to re-examination if after death the estate is insolvent has no basis I can think of.

start with the law
try reading
S.339, Insolvency Act 1986
S.340, Insolvency Act 1986
S.423, Insolvency Act 1986

That should cover a lot of cases.

We would all be doing it if you could get away with it.

"I gift everything away the day before I die"

just does not work to avoid creditors

edit to add:
the insolvency legislation applies except where there is conflict with
Administration of Insolvent Estates of Deceased Persons Order 1989 ("DPO 1986")

with all legislation you then have to check for any more recent acts which may modify some of the sections.

Yorkshireman99

securityguy wrote: »

"If, as seems likely from what the OP has said, assets were deliberately transferred with a view to avoiding the donors creditors then that is usually a criminal offense"

I can't find any legislation around deaths, but had the father gone bankrupt after transferring the yacht for a pound to a son who didn't know the bankruptcy was pending, it would be OK. Insolvency Act 1986, S.284 ("Restrictions on dispositions of property."), specifically "(3)This section applies to the period beginning with the day of the presentation of the petition for the bankruptcy" and "(4) The preceding provisions of this section do not give a remedy against any person—
(a)in respect of any property or payment which he received before the commencement of the bankruptcy in good faith, for value and without notice that the petition had been presented, or". The test in (3) means there has to be at least the beginnings of a bankruptcy action, which there weren't, and the test in (4) - where there might be an argument about "for value" around the £1 - doesn't arise because the test in (3) isn't met.

Oh, and it's not a criminal offence. The transaction is potentially voidable, which isn't remotely the same thing. And even if it were a criminal offence, the offence would have been committed by the vendor, who is now dead. Arguments about conspiracy to defraud with the main actor being dead and the whole offence hinging on the mens rea of the deceased are hardly likely to fly in court ("did your father tell you he was in financial difficulties?" "No". "Er...")

The OP should get legal advice, for sure. But let's not start hares running.

Quite apart from what has been said in post #35 you should look up conspiracy.

securityguy

getmore4less wrote: »

S.339, Insolvency Act 1986
S.340, Insolvency Act 1986
S.423, Insolvency Act 1986
.

Or more to the point the Administration of Insolvent Estates of Deceased Persons Order 1986. Which would require not merely that the estate be insolvent, but that someone seeks an insolvency order and has the official receiver appointed, ie that they raise a bankruptcy petition. The official receiver is not obliged to investigate the affairs of the deceased anyway but can bring matters that come to their attention to the attention of the court. Does the official receiver get appointed to cases involving a few grand of debts? Is there any suggestion in the OP's case that it's going to get to the point of such an order? And if such an order were made, for a few grand, is the official receiver going to undertake an investigation they are under no obligation to make?

"Quite apart from what has been said in post #35 you should look up conspiracy."

I'm willing to bet a round of drinks that no-one, in living memory, has been convicted of the criminal offence of conspiracy to defraud in the matter of the transfer of personal assets prior to death, even if it were done at an undervalue, even if everyone were wearing "we are transferring assets at an undervalue" tee-shirts while making a video of the deal. For a start off, a statutory conspiracy requires that the act that is the subject of the alleged conspiracy be itself criminal, and transfers at an undervalue aren't criminal (they are voidable, which isn't remotely the same thing). Secondly, the CPS guidelines for a conspiracy prosecution are that if you have evidence that the act itself took place, you prosecute that, so conspiracy is far more about things that didn't happen. Read through http://www.kaimtodner.com/law/what_is_a_consipiracy/. Start with the fact that transfers at an undervalue aren't criminal, and outline how therefore a statutory conspiracy could be proved.

So we would be left with common law conspiracy to defraud, which doesn't require that the act complained of be itself criminal. So let's read the prosecution guidance on common law conspiracy and consider whether a case involving a few grand of assets being transferred by someone who is deceased to their son is going to get past "use of this charge should be specifically approved by a supervising lawyer experienced in fraud cases". The test would be, and we are in the realms of fantasy here, that a jury would have to decide that the OP had done things that were "according to the ordinary standards of reasonable and honest people ...dishonest" and "If it was dishonest... then the jury must consider whether the defendant himself must have realised that what he was doing was by those standards dishonest." (the R v Ghosh test for dishonesty) And to a criminal standard of proof, and with the only other participant dead. Could you point to such a case getting to court, ever?

The basic test for the plausibility of legal theories regarding the prosecution with large-calibre legal blunderbusses of what are in fact common events (elderly people who can no longer drive giving cars to their children and then dying within five years with debts, say) is whether such prosecutions actually happen. Insolvency orders resulting in investigation of the last five years' transactions and tests for undervalues? I don't believe such things happen with any significant frequency, but I guess that if you die with hundreds of thousands of debt and a lot of assets went missing in a short period it could happen. Prosecutions for conspiracy in the aftermath of such transactions? I don't believe such prosecutions have ever happened, or would ever succeed, because the criminal test in R v Ghosh, which is absolutely binding, could not possibly be made out.

But I'm always interested in reading law reports, so such a case would, of course, prove me wrong instantly.

getmore4less

securityguy wrote: »

Or more to the point the Administration of Insolvent Estates of Deceased Persons Order 1986. Which would require not merely that the estate be insolvent, but that someone seeks an insolvency order and has the official receiver appointed, ie that they raise a bankruptcy petition. The official receiver is not obliged to investigate the affairs of the deceased anyway but can bring matters that come to their attention to the attention of the court. Does the official receiver get appointed to cases involving a few grand of debts? Is there any suggestion in the OP's case that it's going to get to the point of such an order? And if such an order were made, for a few grand, is the official receiver going to undertake an investigation they are under no obligation to make?

You may have missed that anyone that administers an insolvent estate is covered by the same insolvency rules.

The point is that there are laws to cover the insolvent estates that can access assets (including joint) that seem to have been protected which was your implied question.

In practice with estates it is up to interested parties to make their claims.

This is a lot easier if they already know of relevant transactions or get fed information.

that's why do not get involved other than is allowed by default.

securityguy

"The point is that there are laws to cover the insolvent estates that can access assets (including joint) that seem to have been protected which was your implied question."

"Laws" isn't enough: there needs to be someone both empowered and willing to bring actions under those laws.

Let's take a simple case: I give a ten grand asset to my mate the day before I die, and I die with ten grand of debts. I don't deny that, were I not to have died, that's a voidable transaction were I to be made bankrupt. However, given I have died, one of the creditors would have to seek an insolvency order against the estate, which would result in the appointing of the official receiver, and would then have to both find out about the transaction and then convince a court to void it. I firstly don't believe that's likely, and I secondly don't believe there is any imaginable circumstance in which, even if the courts did get involved in voiding such a transaction, it would result in a prosecution of anyone involved in the transaction, under any imaginable criminal law.

"In practice with estates it is up to interested parties to make their claims."

It is. But claims against the estate will not result in anything being done about what might otherwise be a fraudulent preference, any more than an action against someone living to recover a debt (a CCJ, say) would result in voiding of transactions. Just as you need an bankruptcy order against someone who is alive in order to start looking at fraudulent preferences, you need an insolvency order against an estate to even consider discussing the issue of preferences, fraudulent or otherwise.

I'm always happy to be corrected, but I would suggest that creditors of an estate seeking an insolvency order in court to proceed against an insolvent estate is extremely rare, the unwinding of past transactions rarer still, and prosecutions arising from it are unheard of.

Indeed, I would go further, and suggest that no-one will be able to find a concrete case of any transaction being voided after the death of an individual other than in cases involving millions of pounds, if that.

The idea that someone is going to pursue a complex court action in order attempt to unwind the sale of a small second hand yacht from father to son is an entertaining legal theory, but does not have a basis in practical action by creditors.

Yorkshireman99

The small second hand yacht can easily be worth thousands and the fact that the owner was so keen to try and conceal it suggest that it was sufficiently valuable to make it worthwhile.

securityguy

Yorkshireman99 wrote: »

The small second hand yacht can easily be worth thousands and the fact that the owner was so keen to try and conceal it suggest that it was sufficiently valuable to make it worthwhile.

That it is valuable might be true. But since the only person who can do anything about it is someone who goes to a court and gets an insolvency order, and then finds out about it, and then convinces the official receiver that it's worth pursuing, and then returns to a court to get an order voiding the transaction, and then manages to enforce that order, it's all rather moot.

And a court would have no evidence beyond the most circumstantial that the owner was "so keen to try to conceal it". That it's still moored in the same marina, for example, hardly speaks to it being the Enron conspiracy.

All over the country, elderly drivers are giving up driving and gifting their car to relatives, perhaps on the understanding that they can have the occasional lift. Within five years many of them will die, and some of them will die insolvent. It shouldn't be hard to find a case where one has been pursued for the creation of a fraudulent preference following the obtaining of an insolvency order, should it? For example, this very forum gets all sorts of queries in all sorts of weird and complex probate/estate cases; has the issue ever arisen?

A trip to the Lexis Law database reveals some incredibly obscure, and elderly, cases, none of which were found against the estate anyway, mostly surrounding the activities of one Eichholz (deceased) in the late 1950s (for example, Re Eichholz (deceased), Ex parte Trustee of The Property of The Deceased Debtor v Eichholz; Eichholz's Trustee v Eichholz - [1959] 1 All ER 166). The case prior to that is Barton v Vanheythuysen; Stone v Vanheythuysen - (1853) 68 ER 1215, which the Eichholz case makes much reference to. Yes, took place in eighteen fifty three.

As ever, I'd welcome correction with some cases from within, oh, the last fifty years.