Asset of the estate - or not...

TheGardener

I'm trying to assist a friend who lost his son. Unfortunately, he took his own life. As a young man (a student) he had no will and only a part-time supermarket job he'd had for a couple of years. His Dad has no access to his payslips but as he was just under 22 we think he probably wasn't auto-enrolled in the pension scheme. However, it appears one of the employment benefits was an employer's life assurance 'death in service' scheme and his Dad was named on the beneficiary form. At this stage, he doesn't know if the Trustees will agree to the payment (due to the nature of the death) and as expected, they are waiting for the Coroner's final death certificate after the inquest proceedings are completed. However, while trying to make a start on the probate forms, we are unsure if any payment is made from the assurance would be classed as part of his son's estate (there are some debts, bank loan, etc) or whether any payment would be classed as belonging to his Dad (the funeral costs were difficult for him).
Also - the motorbike has a value so is it an asset? It was bought with a bank loan rather than finance and has a large amount outstanding.  Any pointers would be much appreciated. 

p00hsticks

I think you'd need to check with the employer, but in my recent experience a Death In Service benefit is paid direct to the person named in the expression of wish and doesn't form part of the estate.

The value of the motorbike is an asset of the estate, but the outstanding loan is a debt - it;s quite possible that the latter will be more than the former. 

As an aside - are you sure that probate is going to be needed ?. If he didn't own any property and only a realtively small amount of savings the chances are it won't be necessary...

Marcon

p00hsticks said:

I think you'd need to check with the employer, but in my recent experience a Death In Service benefit is paid direct to the person named in the expression of wish and doesn't form part of the estate.

 

You're right that the a death in service benefit is normally outside the estate, although it isn't invariably paid to the person(s) named in the Expression of Wish form. However, if the form is up to date and looks 'reasonable' - as seems to be the case here - it would be quite unusual for the trustees of the DIS scheme not to pay to the person nominated. Even so, there is likely to be a wait as the various procedures are ploughed through; trustees are required to carry out 'due diligence' even where a recent EOW exists.

OP, this is particularly sad with such a young man and the fact he took his own life. If the funeral costs were difficult for his dad, it is worthwhile the father approaching the company both to check that the payment (if one is indeed payable; it may well be, despite the circumstances) will be made to a recipient chosen at the discretion of the trustees of the DIS scheme (and thus outside the estate) and there would be no harm if he mentioned the cost of the funeral.

Keep_pedalling

Probate will almost certainly not be required and your friend should take great care as his son’s estate might be insolvent.

It seems his only major asset is the motorbike, and the first call on any cash raised against its sale will be funeral costs. If there is nothing left after funeral costs then things are very straight forward. You friend simply need to write to the creditors informing them of his death, that his estate is insolvent and that no one is administering it. He also needs to include a copy of his death certificate. 

TheGardener

Thank you all for your comments - they are most helpful. I did wonder about probate as there are no assets or dependants. But am I right in thinking the father will need to complete the inheritance form to confirm there are no taxes due?

RAS

I'm sorry your friend is facing such a difficult situation.

No. Unless probate is needed then there is no need to complete any form.

I'd suggest that dad informs all the creditors including that the estate is likely to be insolvent. He needs to collect together any financial documents and keep them safe; so he can offer them to any creditor who wants to administer the estate. Also to keep the bike safe in the short-term.

Since the motorbike was funded by a loan, it would be wise to identify if the loan was secured on the bike. If so, the bank would deal with it.

The death in service grant if made would probably not be included in the estate, as the DIS form was completed.

thegreenone

I am so sorry for your friend's loss.  Tragic.

When your friend receives the Death Certificate, there will be details of the Tell Us Once service.  He needs to complete this and all the government agencies should be informed, including HMRC.

TheGardener

Thank you all again - yes it has been a very difficult time all round. So very sad. So in order to assist my friend, are we saying that actually - other than waiting for the final death certificate and dealing with the lad's employer with regard to the 'death in service benefit' there isn't actually anything else official (HMRC etc) that needs doing? (DVLA, Passport Office etc all done via 'Tell us once')

The bike can be sold and then - if we are treating this as an insolvent estate - is there an obligation to share whatever the bike makes equally between all creditors? Or - is it in his best interests to walk away from any of his son's financial liabilities? 

Savvy_Sue

If the estate is insolvent, it is best for him to walk away. Sharing anything raised from the bike equally between all creditors is definitely NOT the thing to do, because some debts are higher priority than others, and getting it wrong means creditors who were disadvantaged by an incorrect distribution can come after Dad. 

I know this will feel very wrong, but keep the bike and its loan away from everything else. If the loan was secured on the bike, then as RAS said, the lender will deal with it. 

Keep_pedalling

Savvy_Sue said:

If the estate is insolvent, it is best for him to walk away. Sharing anything raised from the bike equally between all creditors is definitely NOT the thing to do, because some debts are higher priority than others, and getting it wrong means creditors who were disadvantaged by an incorrect distribution can come after Dad. 

I know this will feel very wrong, but keep the bike and its loan away from everything else. If the loan was secured on the bike, then as RAS said, the lender will deal with it. 

Tho OP said this was a bank loan so it will be unsecured dept. If the value of the bike does not exceed the funeral costs then this potential problem does not exist.

Marcon

RAS said:

The death in service grant if made would probably not be included in the estate, as the DIS form was completed.

Just to be clear - completing the DIS form isn't what makes the payment outside the estate; it is the fact that it is paid at the discretion of the trustees.

Even if they did choose to pay it to the estate (or more accurately the personal representatives), it would still not be subject to IHT (again, because it is paid under trustee discretion - that's the key point).