Pension death grant and debts

Malthusian

xylophone wrote: »

That said, is there not a moral obligation to repay your mother's debts?

None whatsoever. This isn't the Victorian era and children are not liable for their parents' debts. Debts die with the person.

There would only be an obligation to repay them if the mother's estate had the money to do so. The mother's estate does not. Her pension money is not part of her estate. It was money held in a trust to provide for her retirement. Her retirement ended prematurely and under the terms of the pension arrangement she had, a death benefit is payable at the trustees' sole discretion. It is the pension trustees' money and after the death benefit is distributed it will be the children's money. It was never the mother's money and has nothing to do with her debts.

If she had gone bankrupt twenty years ago, her pensions would (to some extent) have been protected from her creditors as it would still be money held on trust to provide for her retirement, not to pay her creditors in her working life. Same principle applies here.

If of course she had lived a full life then the trustees would have passed the money to her on a monthly basis, at which point it would have become her money and she may have been obliged to use it to repay her debts in accordance with the terms agreed with her creditors. That is exactly what happened for four years. However the remaining six years' worth of guaranteed payments were never her money and have nothing to do with her debts.

I don't know what the OP was doing filling out probate forms as the estate was insolvent and they should have walked away and let the creditors deal with it. (At the risk of repeating myself, the pensions are an entirely separate matter.) By intermeddling, at best they have opened themselves up to getting grief from the creditors, and at worst they might actually become liable if they make a mistake.

xylophone

Even if the trustees decided to follow the laws of intestacy, it was still paid at their discretion as they have helpfully confirmed: 'please note; this payment does not form any part of Mr *******'s Estate'.

The original question was not about the payment made in respect of the stepfather's pension but about that made by LGPS in respect of the mother's pension.

We were hoping our confirmation letter from my mother's employer would have the same wording, however it did not. I asked if they could possibly issue us a letter stating the death grant we were awarded does not form part of the estate, however they say it is a very grey area and are not sure of the legalities so cannot give us an answer. They advised me to seek legal advice.

The information given on the LGPS web site is cited in my post above.

I assume that this is the official position.

olivia84

Thank you again everyone.


Yes, silvertabby, I do believe my step-dad was the named beneficiary for my mum's pension, and obviously this wasn't amended before she died 10 weeks later. I also believe that my step-dad's death in service was paid to myself and my sister and not to my mum's estate as our letters made no mention of my mum at all and after my mum died and I contacted my step-dad's work, we had to fill out completley new forms (at their request) in relation to the claim being from ourselves and not on behalf of my mum.


I have just had a look at the probate certificate and at the bottom of it it states:



"It is hereby certified that it appears from information supplied for this grant that the gross value of the said estate in the United Kingdom does not exceed £325,000 and the net value of such estate is Nil"


Of course, this doesn't clarify that any monies released after her death won't go into her estate; just that at the time of her death, the value of her estate was nil.


x

olivia84

Thanks malthusian,


The way you have explained it is really how I was understanding (hoping) the situation. That the money was never really my mum's in the first place (well, being a lump sum) As you say, had she lived, then the money would have been given to her on a monthly basis and that would have been used to pay her loans; and agreed; had she gone bankrupt after taking the loans out then any future earnings (pension payments) would have been protected from paying the loans.



What I might do is write to the creditors and include a copy of the probate which states that her estate has a value of nil. That might be sufficient for them to be able to close the accounts down. If they want more clarification that any death grant paid out does not form part of her estate (they do know we were going to receive a payment as I had told them) then I can send them the letter our solicitor is drafting for us which will hopefully say that as far as they are concerned (in Scotland) death grants do not form part of a person's estate. If they then want clarification using English law, then I might see if I can have the same sort of letter issued from an English solicitor. I will also keep on at the LGPS people to see if they have and answer for me yet.


many thanks again


x

xylophone

None whatsoever. This isn't the Victorian era and children are not liable for their parents' debts. Debts die with the person.

I was not suggesting that children are responsible for their parents' debts.



I was asking a question as to whether, since the money arose from money that would otherwise have been received by the deceased and presumably used to repay her debts, there was not a moral obligation to make the repayments.

Malthusian

xylophone wrote: »

I was not suggesting that children are responsible for their parents' debts.

I was asking a question as to whether, since the money arose from money that would otherwise have been received by the deceased and presumably used to repay her debts, there was not a moral obligation to make the repayments.

Asking someone "are you not morally responsible for your parent's debt" in bold letters is suggesting that they are responsible for their parent's debt from where most people stand. They are not responsible and there is really no need for the question to arise.

The fact that if she'd lived longer, the money would have passed from the pension trustees to the mother and at that point become available to her creditors is neither here nor there, as she didn't.

Let's say Xylophone is the beneficiary of a discretionary trust with £100,000 and two beneficiaries, Xylophone and me. I die leaving debts of £100,000. Xylophone does the sensible and tax-efficient thing and asks the trustees to distribute the £100,000 to them, the sole beneficiary, and wind up the trust. How much of my estate's debts is Xylophone now obliged to repay, bearing in mind this is money that could otherwise have been received by me and used to repay my debts if I hadn't died? a) £0 b) £50,000 c) £100,000 d) Depends on how much capital the trustees would have advanced to me if I hadn't died.

The correct answer is a) £0. The money was never mine and Xylphone is not responsible for my debts.

The only reason the OP's scenario feels any different is that I'm not Xylophone's parent, which means that any idea of "moral obligation" to repay the parent's debts is pure Old Testament "sins of the father". Or a misunderstanding of the legal difference between pension money and a person's own estate.

Finance companies are big boys, they will manage without. When they lend to late-middle-aged and elderly borrowers with no net assets, the risk of some of those borrowers dying and the debts being written off is priced into the interest rate. Why should they have their cake and eat it by having the cost of the OP's mother's loan recovered from other borrowers via the interest rate, and having the OP make them an ex-gratia payment on top of that?

xylophone

Or a misunderstanding of the legal difference between pension money and a person's own estate.

I am perfectly aware of the difference between pension money and a person's own estate.

Let's say Xylophone is the beneficiary of a discretionary trust

It seems to me a different case.

I would never have had the right to money from such a trust at any time.

If the other beneficiary had died, there would be nobody but me to benefit (at the Trustees' discretion of course).

If I did benefit, then it would be up to me to decide whether I felt any obligation to repay the debts of my fellow (but late) potential beneficiary and this would depend on my view of the circumstances of the case.

In the case presented by the OP, the initial question was as to whether the death grant from her late parent's pension scheme was payable to her estate.

The administrator paid the money to the OP but declined to declined to give a definitive statement as to whether it was outside the estate.

The only guidance given about death grants is given on the LGPS web site as cited.

Silver tabby (an expert on the scheme) has made a definitive statement that the money is outside the estate and belongs to the OP to do with as she wishes.

The question then is whether or not she feels any moral obligation to repay her parent's debts on the basis I outlined in my previous post.

That is entirely her decision.

Just one thought though, if the debts were owed to a personal friend of her mother or another relative say, (rather than to a "faceless" bank or credit card company), would her decision be any different?

Just a question.......

Malthusian

xylophone wrote: »

I am perfectly aware of the difference between pension money and a person's own estate.

I am aware that you are aware, which means we are talking "the sins of the mother shall be visited unto the daughter".

I would never have had the right to money from such a trust at any time.

The OP's mother never had the right to this money (the six years' worth of remaining guaranteed payments) either. She died before becoming entitled to it.

Just one thought though, if the debts were owed to a personal friend of her mother or another relative say, (rather than to a "faceless" bank or credit card company), would her decision be any different?

Shouldn't be. What kind of "personal friend" comes chasing after their friend's bereaved daughter and tries to stick their mother's debts on them, outside of Charles Dickens novels?

Some people feel morally obliged to hit their children with sticks if they can't recite Bible verses from memory. Questions of moral obligation have right and wrong answers the same as any other. It is indeed entirely the OP's decision and if it would make her permanently happier in her own mind to make an ex-gratia payment to her mother's estate's creditors, she can do so. If however it would make her happier to use the money to improve her own financial situation, then morally she should do that instead, and it sounds like that's the case.

And if the OP was inclined to use the death benefit from the pension trustees to repay her mother's estate's creditors I would advise her against doing so in the strongest possible terms. Chances are that if she did give them some of the OP's own money, they would come after her for even more.