Outstanding Peer 2 Peer Accounts in Deceased Name

jaytee28

Hi  I am a executor of a fairly complex estate of a close friend.   Due to the complexity of my friends affairs I hired the Co-op to deal with the estate and they have settled and distributed circa 95% of funds however my friend had money in peer-to-peer organisations namely Crowd2Fund and Crowdstacker.   While part of these funds have been released I appreciate that by the very nature of these it may be years before every individual borrower entity is resolved. 

Co-op have now told me that they are not willing to leave the estate open given the potential length of time involved so will be making a "final" submission to HMRC re Inheritance Tax payable, and a final statement of account, and final distribution to beneficiaries.     Also that the two companies concerned will be instructed to deal with me directly as an executor re any further funds due.  

Has anyone else been in this position?  I am worried on how I'll keep tabs on things and whether I'll be stung for further IHT down the line.   Any advice would be very much appreciated.

Keep_pedalling

The problem with P2P investments for executors is the loans held in the estate that have gone bad, as there is no end date with these, and unlike fixed term savings accounts you have to wait until the final payment of each loan is made before you can be shot of it. 

This is one reason I have got out of P2P although I still have accounts with 2 of them both containing just a few hundred quid of bad dept.

It is highly unlikely that this will cause you any further Issues with IHT as the current value of those accounts will have been included, and the chances of getting any bad debts payed is very near zero. You will need to distribute any interest and capital payments from longer term loans to the residual beneficiaries but I would save those up until you have something worthwhile to distribute. 

Interest will be subject to income tax so you will also be lumbered with reporting this.

jaytee28

Thank you!   Your last line about interest.  Would that be reported re the estate or me/us as beneficiaries?  Sorry if I sound thick. 

lr1277

As this might be a long running situation there is one circumstance you would need to check on as I am not sure of my facts.
If you were to die before this was resolved, I believe your executor would also become the executor of your friend’s estate and finish up there as well as performing the duties required for your estate. I suggest you check this out.

Marcon

What sort of amounts are involved?

jaytee28

About 20000-25000 invested alltogether.

Keep_pedalling

jaytee28 said:

About 20000-25000 invested alltogether.

That will be quite a lot of interest payments, and I don’t know how you would handle this as far as reporting tax returns. I think you need to query this this with HMRC.

doodling

Hi,

A silly question from someone not familiar with P2P lending - is there any way of selling (or even giving!) the loans to others?  Even if it was for a relatively small percentage of their real value - I can see that the administration costs in keeping those loans could become significant.

If that is not possible then I think that the Co-op may have made a mistake in distributing the majority of the estate funds (depending on their value).  To me it looks like the estate administration could continue for a long time and if there is no way of getting rid of those assets then there needs to be money held back so that their administration can be funded.  In your shoes I'd simply pay someone to do that administration for as long as it takes, but to do that you will need some estate funds.

Keep_pedalling

doodling said:

Hi,

A silly question from someone not familiar with P2P lending - is there any way of selling (or even giving!) the loans to others?  Even if it was for a relatively small percentage of their real value - I can see that the administration costs in keeping those loans could become significant.

If that is not possible then I think that the Co-op may have made a mistake in distributing the majority of the estate funds (depending on their value).  To me it looks like the estate administration could continue for a long time and if there is no way of getting rid of those assets then there needs to be money held back so that their administration can be funded.  In your shoes I'd simply pay someone to do that administration for as long as it takes, but to do that you will need some estate funds.

Not a silly, P2P companies all used to have a secondary market where you could sell your loans, at face value, for a premium or a discount and it used to quite easy to sell until a combination of companies like Lendy going belly up, and the CVID pandemic virtually took all the buyers out of the market. I am not familiar with the two companies the OP is dealing with but both appear to still operate a secondary market so although it may take some time to sell it is worth trying to liquidate as many long term loans as possible.

That still leaves the problem of defaulted loans and those in arrears as they cannot be traded, and recovery is likely to take many years.

I don’t agree with the second point, the costs of paying someone to continue the administration is likely to costs more than the value of the assets, and I am sure the residual beneficiaries don’t want that or to delay getting the bulk of their inheritance.

doodling

Hi,

Keep_pedalling said:

doodling said:

Hi,

A silly question from someone not familiar with P2P lending - is there any way of selling (or even giving!) the loans to others?  Even if it was for a relatively small percentage of their real value - I can see that the administration costs in keeping those loans could become significant.

If that is not possible then I think that the Co-op may have made a mistake in distributing the majority of the estate funds (depending on their value).  To me it looks like the estate administration could continue for a long time and if there is no way of getting rid of those assets then there needs to be money held back so that their administration can be funded.  In your shoes I'd simply pay someone to do that administration for as long as it takes, but to do that you will need some estate funds.

[...]

I don’t agree with the second point, the costs of paying someone to continue the administration is likely to costs more than the value of the assets, and I am sure the residual beneficiaries don’t want that or to delay getting the bulk of their inheritance.

That is my point.  If the administration costs more than the assets are worth, and the assets cannot be sold, then they are not assets, they are liabilities and money needs to be set aside to meet them, just like any other debt.  If the Co-op has not made provision for those liabilities then they have made a mistake.  The residual beneficiaries don't really get a choice in this (unless they are willing to accept ownership of the loans themselves, if that is possible).

Keep_pedalling

doodling said:

Hi,

Keep_pedalling said:

doodling said:

Hi,

A silly question from someone not familiar with P2P lending - is there any way of selling (or even giving!) the loans to others?  Even if it was for a relatively small percentage of their real value - I can see that the administration costs in keeping those loans could become significant.

If that is not possible then I think that the Co-op may have made a mistake in distributing the majority of the estate funds (depending on their value).  To me it looks like the estate administration could continue for a long time and if there is no way of getting rid of those assets then there needs to be money held back so that their administration can be funded.  In your shoes I'd simply pay someone to do that administration for as long as it takes, but to do that you will need some estate funds.

[...]

I don’t agree with the second point, the costs of paying someone to continue the administration is likely to costs more than the value of the assets, and I am sure the residual beneficiaries don’t want that or to delay getting the bulk of their inheritance.

That is my point.  If the administration costs more than the assets are worth, and the assets cannot be sold, then they are not assets, they are liabilities and money needs to be set aside to meet them, just like any other debt.  If the Co-op has not made provision for those liabilities then they have made a mistake.  The residual beneficiaries don't really get a choice in this (unless they are willing to accept ownership of the loans themselves, if that is possible).

Their will be some bad dept in there, but overall the accounts will be assets, it just takes a long time to get those loans back unless you can find a buyer can be found for them. There will be no costs involved for a lay administrator, just if your use a professional.