Sole trader death and debt liability

thewickedpickett

Hi I’ve been searching the forums this morning but I’ve found lots of helpful stuff but I was wondering if someone could advise on the following situation.

My father in law died last week. He was a sole trader operating as a franchisee in the sign business. He employed my wife as an employee however she has full signing authority on the bank account and is also named alongside him in the franchise agreement. There is no will.

The business was not in good shape and although he left substantial money in a house and bank account these were joint with his wife so I believe these are not part of the estate. Therefore his actual estate will not be able to cover the bank overdraft and other debts at time of death (around 20k debt and likely a 8-10k shortfall).

My wife does not want to continue the business but is worried sick that the franchisor can hold her liability for debt owed to them. Is this the case or does her being an employee prevent this from happening?

Yorkshireman99

thewickedpickett wrote: »

Hi I’ve been searching the forums this morning but I’ve found lots of helpful stuff but I was wondering if someone could advise on the following situation.

My father in law died last week. He was a sole trader operating as a franchisee in the sign business. He employed my wife as an employee however she has full signing authority on the bank account and is also named alongside him in the franchise agreement. There is no will.

The business was not in good shape and although he left substantial money in a house and bank account these were joint with his wife so I believe these are not part of the estate. Therefore his actual estate will not be able to cover the bank overdraft and other debts at time of death (around 20k debt and likely a 8-10k shortfall).

My wife does not want to continue the business but is worried sick that the franchisor can hold her liability for debt owed to them. Is this the case or does her being an employee prevent this from happening?

You need to look closely at the franchise agreement. Is there a property involved and what is the ownership, joint tenants or tenants in common? Professional legal help is almost certainly needed as well.

getmore4less

First establish where your wife stands on her status on the franchise and any accounts she has been involved with to establish any joint liabilities.

Any that your wife has nothing to do with will have to go after his wife to recover the debts.

if she does have responsibility she may also be able to go after the wife for his share but that will need legal advise.

FYI : joint assets do not get protection using survivorship rules.

thewickedpickett

We are unsure but think that the deceased house is joint tenant with his new wife. I thought this meant she got the house outside of any estate concerns. Similarly there is money in a joint account of the deceased and his wife. I assumed she got that and it was not part of the estate? Is this wrong?

Is my wife having full singnsture authority on the sole trader bank account enough that the bank can go after her for the overdraft money?

thewickedpickett

She is named as joint franchisee in the franchise agreement but has always been an employee under her dad who was a sole trader.

getmore4less

joint assets do not get protection using survivorship rules.

I the estate is insolvent creditors can go after joint assets

Keep_pedalling

This sounds like a very strange buisiness arrangement, the actual position of your wife seems to be partner rather than employee, and as such is likely to be responsable for the debts.

The simple solution would be for your MIL ( or is that step MIL?) to do the right thing and settle the debts.

thewickedpickett

I assumed because his wife simply needs to present death certificate to get the joint account money (which would cover debt) that it was outside of the estate.

thewickedpickett

The franchise agreement seems to be a business arrrangement. It mentions their fees so presumably my wife could be liable for them given she is joint franchisee with the deceased.

Who is liable for the bank overdraft money in the deceased’s name and HMRC in the deceased name

Keep_pedalling

thewickedpickett wrote: »

The franchise agreement seems to be a business arrrangement. It mentions their fees so presumably my wife could be liable for them given she is joint franchisee with the deceased.

Who is liable for the bank overdraft money in the deceased’s name and HMRC in the deceased name

Unless MIL is simply going to pay this off (any reason she would not do this?) then your wife needs professional advice?

Edit - HMRC debts would be solely the responsibility of the sole trader, the danger here is the ambiguous status of your wife and an HHRC investigation might be a bit uncomfortable for her.

thewickedpickett

I suspect the MIL wants my wife to sort out all debts with her share of the joint account as left to her by the deceased. This will cover the debts. Just.

What should my wife do about current orders etc? She is ringing he bank and HMRC tomorrow to inform them.