Debts owed to deceased by beneficiary

Sevennotemode

I am the sole executor to mams will.

One of the beneficiaries owed her £3k and never repaid it.

Am I right in thinking that this debt should be deducted from his bequest and then redistributed to the other
beneficiaries in the same percentages as in the will (excluding his %)

Also, the same beneficiary filed for bankruptcy in the US (chapter 7) many years ago. Although I have
got from the US bankruptcy courts a discharge notice it does say that the discharge does not include domestic debts. His ex wife claimed a big sum from him but it was never paid.

So, am I right in thinking that the bequest should be paid to his ex-wife ?

Is this clear cut in that any debts have to be paid from the bequest before the beneficiary gets his share ?

Messy, I know but I want to avoid getting solicitors involved and incurrring heavy fees.

Any thoughts would be appreciated.

TBagpuss

Well, if you get it wrong you could potentially be personally liable to hoever loss out aas a result of you not discharging your duty as executor correctly, and the cost of getting advice would be paid from the estate, not out of your pocket, so in your position, I would definitely be getting some proper advice, particually in relation to the American debt and exactly what the specifc terms mean and how they are defined.

It may be appropriate to deduct the £3K from the amount due to the beneficiary, but you would need, I think, to declare the debt as an asset of the estate when you preare the estat eaccoutns, and also ned to be clear about the terms of the loan to work out the correct figure - was there any written agreement? Any arrangwement about interest?Has naything been paid back? How long ago was the money loaned and has it ben 'acknowledged' by the debtor since?

In relation to the US situation then this is far more complex as you would need to know hw the relevent bankruptcy rules in the specifc State involved work. For instance, even if the debt to the wife was not extinguished by the bankruptcy, it may be timebarred now, depending on long ago it was incurred - in your position i think I would be getting some proper advice to protect myself.

Obviously if the beneficiary were to agree that those debts shoud be cleared directly out of their inheritance then that would be a little diferent, but even there, i would make sure that you get that in writing and specifcally authorised by them, with a clear statement of the debt and that they are authorising you to pay it from their share of the estate .

Sevennotemode

As regards the £3k debt, this was given in 2009 and there was no written agreement, I did ask the beneficiary in 2010 when he was going to repay but I am still waiting for a reply. Does the 7,nearly 8, years time delay bar the recovery of this debt ?

As for the US bankruptcy issue, again this was in 2009 - would any issues around the domestic obligations be time barred ?

The discharge says:

"Debts that are Not Discharged.
Some of the common types of debts which are not discharged in a chapter 7 bankruptcy case are:
a. Debts for most taxes;
b. Debts incurred to pay nondischargeable taxes;
c. Debts that are domestic support obligations;"

I have not yet sent the estate accounts but do you think it a good idea to prepare the accounts with the £3k debt shown as a debtor to the estate and then taken out of the beneficiaries bequest.

For the US bankruptcy, I may put a note to the distribution saying that the bequest is to be paid to the ex-wife and then let the beneficiary do all the leg work in proving (or otherwise) that the bequest should be paid to him and not the ex-wife and then see what transpires.

Obviously, I am well aware that once you pay money to somebody it is very difficult to get it back and so if I put the onus on the beneficiary to explain why he thinks he should get it (and at his expense) then I can further consider my next move.

moneyistooshorttomention

Sevennotemode wrote: »

For the US bankruptcy, I may put a note to the distribution saying that the bequest is to be paid to the ex-wife and then let the beneficiary do all the leg work in proving (or otherwise) that the bequest should be paid to him and not the ex-wife and then see what transpires.

Obviously, I am well aware that once you pay money to somebody it is very difficult to get it back and so if I put the onus on the beneficiary to explain why he thinks he should get it (and at his expense) then I can further consider my next move.

I would tend to do that personally - ie trying to ensure that the ex gets the money due to her and hopefully anyone else he still owes money to in actual fact (even if deemed "discharged because of the bankruptcy").

You do need to cover your back legally to ensure he can't have a go at you for repaying his debts (be it the £3k/money to ex-wife/money to his creditors). But, in your position, I'd be trying my best to ensure he met his responsibilities first - rather than handing the money straight to him - and see if there was a legal way to only hand him the left-over residue after he has paid his debts.

Keep_pedalling

How do you know for certain he owns his ex wife money?

Sevennotemode

Well I am not 100% sure that he does, that is what I am trying to ascertain.

On the US bankruptcy court amendments schedule it lists under Schedule F - Creditors Holding Unsecured Non-Priority Claims $XXX.This was back in 2009 and so I am unsure whether this is time barred/ unenforceable or what ?

Any thoughts would be appreciated.

-taff

Sevennotemode wrote: »

As regards the £3k debt, this was given in 2009 and there was no written agreement, I did ask the beneficiary in 2010 when he was going to repay but I am still waiting for a reply.

If there was no written agreement, this can be seen as a gift, so unfortunately, you'll be in treacly water if you try to withold this part of the payment, because you have no proof it was a loan.

Savvy_Sue

Sevennotemode wrote: »

Well I am not 100% sure that he does, that is what I am trying to ascertain.

On the US bankruptcy court amendments schedule it lists under Schedule F - Creditors Holding Unsecured Non-Priority Claims $XXX.This was back in 2009 and so I am unsure whether this is time barred/ unenforceable or what ?

Any thoughts would be appreciated.

It's not thoughts you need, it's proper legal advice which you can rely on that you need. Proper, as in paid for, so that if they get it wrong and either the debtor or his wife comes back to you as executor demanding money you should have paid them, you can sue the pants off the solicitor who gave poor advice.

Obviously it shouldn't come to that, but you really can't rely on our advice.

And I can't see that it would be that expensive. Find one who deals with both US and UK work, ask "in this situation, would the wife be owed money or has the bankruptcy ceased? Should I pay the borrower? Do I deduct this amount he borrowed from his share?"