Personal Debt when you Die

Damon_Hawthorn

Hi , a friend has sadly been told that he has a terminal illness , he has a relatively small credit card balance of a few grand.
I used to work for a credit card company, many years ago and we used to just write off all debt upon death.
He is trying to sort his affairs before the inevitable, but obviously wants to leave as much as possible to his wife. The credit card debt is personal and they have a joint bank account and joint ownership of their mortgage free property. So as i understand these items will not form part of his estate. However he has a car 5k and another bank account in his name with about 5k in it. He is trying to sell the car and give the cash to his wife.
When he dies , he will likely have no assets other than the property in which his wife is living,
Does anyone know if they will just write off the debt, or pursue her from the money he has effectively gifted her ( how will they know anyway ? )

I realise that they have a right to this money, but in the real world will they actually pursue that right ? He knows what he is suggesting is wrong, but is just doing whatever he can to provide as much as possible for his wife before he goes.

Thank you.

[Deleted User]

Yes they can actively pursue it and will likely deduct if from the estate or other assets/money that is in his name

BoGoF

Depends on what you mean by relatively small?

Couple of hundred, I would have thought they would just write off.

Couple of thousand, I imagine they would want confirmation that he had no assets. On that note I wouldn't be so sure that money in a joint account wouldn't form part of the estate.

EarthBoy

BoGoF wrote: »

Depends on what you mean by relatively small?

The OP said:

Damon_Hawthorn wrote: »

he has a relatively small credit card balance of a few grand.

etienneg

Clearly you realise that there's a difference between what's theoretically illegal and what people will bother about in practice. However, "a few grand" is quite significant, so don't assume nobody will bother.

It's also significant that you say "He knows what he's suggesting is wrong".

In theory (at least), acting in this way would be fraudulent. So, again in theory (at least), the wife receiving such "gifts" would be complicit in fraud (either as a party to it or an accessory). Is this what either of them would want to get mixed up in? I would think not.

The wife will be left dealing with her husband's affairs and will have to act properly (or become a criminal herself). Anything that is part of the estate must be used to pay off any debts before it can be inherited. They really would be best advised not to get involved in dubious "gifting", as its likely that she would end up paying off the debt anyway.

AndyCF

This may or may not be any help but I do recall reading a year or two ago, there was something about a 7 year period for gifts or transfers, in other words (from what I can recall) anything < 7 years could be -possibly- be taken.

My memory is only jogged by this as I saw something on either BBC News or Teletext (what passes in the very vaguest sense imo for 'Teletext' these days, bring back Mode7 displays please!) about it being changed down to 5 years to make it less confusing.

I am not able to research this now and probably would not be best I did as I'm not sure however if others read this they may realise what I am on about ( ? ) and be able to expand on it, if its actually relevant or not. , It may not apply to couples I do not know.

Chino

AndyCF wrote: »

It may not apply to couples I do not know.

It doesn't!

"There’s also no Inheritance Tax to pay on gifts between spouses or civil partners. You can give them as much as you like during your lifetime, as long as they live in the UK permanently."
https://www.gov.uk/inheritance-tax/gifts

18cc

Although I am not certain how this applies between husband and wife in general when you are an executor of someone's will you need to act in a fair way

so for example if you had knowledge of a credit card debt and didn't pay it out of the estate then you personally as executor can be liable for that debt

so if you ever find yourself to be an executor just be careful

foxy-stoat

Highly unlikely lender will bother chasing the Estate for the money, but whoever the executor is should do their best to pursue any assets and cash they had and pass the money onto the lenders.

So if the executor follows the letter of the law then they should be chasing the wife for the money as he has gifted assets to her prior to his death.

PRAISETHESUN

He probably needs to be aware of the inheritance tax implications of "gifts" before giving away any money to his wife, but otherwise debts form a part of the estate and are typically not written off just because the person has died. Any assets left in the estate will have to be used to service the debts when creditors come knocking - don't try to hide assets from creditors as this can end up really bad if it gets found out. If there are no assets then the creditors will usually write the debt off as even though then can get a judgement they cannot enforce it since there are no assets to seize. I'd also suggest avoiding keeping any money in joint accounts as my understanding is that in some situations the money can be considered part of the estate, even if it is joint names, and can be pursued by creditors.

NoodleDoodleMan

On that note I wouldn't be so sure that money in a joint account wouldn't form part of the estate.

I've heard that joint accounts can be frozen when one of the holders passes away - not sure if that's true, or if it is, how often it happens.

I would have thought a joint account must be considered as part of a deceased's estate.

Maybe that's why a bank would freeze it until debts are cleared ?