P2P investment ... redemption on death

eddyinfreehold

Something that occurred to me out of the blue just now. I was wondering if anyone has any experience of this situation seeing as Peer to Peer investments are quite a new thing and realising your investment can take time as it depends upon your holding...your multiple loan parts... being bought by existing or new investors in the market.


I have a reasonable investment in one P2P company and have held it for about two years. Let's call it £10k I put in as an experiment. It hasn't been especially good as a fair percentage of the borrowers default and recoveries are poor. More that half the profits gained have been eaten by loan defaults so far. It's currently returning about 3% pa. I would estimate it would take over a year to extract myself from the entire holding, probably losing money in the process.


My question is ....What happens on my death? All my other investments are fairly straightforward to settle...bank accounts, building society accounts, a HL dealing account and Premium Bonds plus of course property. Does a P2P company freeze the asset as per other financial institutions and repay the value at Date of Death within a reasonable timeframe, or is there a protracted time period where the account is still active and 'trading' until the Executors instruct otherwise?


I'm not actually planning to get run over by a bus anytime soon, but I wouldn't want this one investment to prolong the settlement of my Estate for my family's sake. Just a thought.

getmore4less

The T&Cs should lay out what the options are for the administrator to deal with a deceased persons assets/debt held by the P2P organization.

unless there are specific clauses to unwind the position quickly the normal T&C continue to operate with eh administrator acting as trustee.

For example many(most/all?) mortgages include clauses that the debt remains and the administrators(on behalf of the estate) become responsible for managing the debt.

eddyinfreehold

Thanks GM4L, I glazed over at p94 of the small print I admit. I was rather lazily wondering if anyone had direct experience. As this was not a debt that required servicing but an asset that usually 'auto invests' profits, it would need management rather than just freezing I assume.

Keep_pedalling

The issue with P2P is bad debts which could take years to play out. I am pulling out of several P2P companies, but I am somewhat stuck in Assetz Capital due to holding small amounts in 3 bad loans, one of these has already been frozen for 2 years.

eddyinfreehold

Do you suppose it is possible to write those bad loan parts off, agreeing no liability to the P2P company, thereby releasing all the 'good' loan parts for resale and speeding up closure of the account?


Example: Say I have £10k invested as loan parts, plus £3k of interest on those reinvested, but £2k of bad debt as loan parts awaiting full, partial or no recovery? Could an executor write off the £2k to yield the £11k owing? Would this be regarded as prudent management by the executor of an estate in administration? Hypothetical questions I know but a real life case must appear soon.

getmore4less

but £2k of bad debt as loan parts awaiting full, partial or no recovery? Could an executor write off the £2k to yield the £11k owing? Would this be regarded as prudent management by the executor of an estate in administration?

Is there no mechanism in the system to sell on the debt(discounted)

That's how the rest of the lending market deals with getting bad debt off the books.

Would also need HMRC guidance on valuing the asset if there is going to be and IHT bill.,

eddyinfreehold

Is there no mechanism in the system to sell on the debt(discounted)

Not that I'm aware of. The losses are almost total. Recoveries are less than 3%. Who would buy that debt from runaway directors who liquidate limited companies?

Malthusian

This is a problem for anyone who dies leaving an estate containing illiquid assets, P2P or otherwise.

It is essential that the executors take professional advice so they can establish that they have done the right thing with them. (E.g. to sell them at fire sale prices, delay distributing the estate or pass them directly to the beneficiaries if the platform allows that.)

In addition to the usual risk that the benefactor faces (i.e. that the assets may fall in value or go bust), there is an extra risk for the beneficiaries, that the assets have to be valued as more than they are actually worth for IHT purposes.

If any of this is a concern then you should consider selling the P2P investments off and sticking to mainstream assets traded on public exchanges (like the LSE) that, exceptional circumstances aside, could be accurately valued by your executors on a daily basis. (Real exchanges open to everyone, not the pretend money-game exchanges run by some P2P companies.)

Do you suppose it is possible to write those bad loan parts off, agreeing no liability to the P2P company, thereby releasing all the 'good' loan parts for resale and speeding up closure of the account?

If the executors are considering something like that they must take professional advice. If they give up the bad loans for nothing when they could actually be worth something they risk the beneficiaries suing them personally.

eddyinfreehold

Good advice from everyone above. Thank you. Pretty much what I feared, but good to have it verified by more capable people.


For me it's a factor I should have considered when buying the product, but at that time I had no experience of the responsibilities of being an executor. I do now and would think twice before looking at P2P again.