Estate valuation, house that’s part owned , debt payment

Safety1

Hi all, 
if the deceased (no will) , owns a 25% share of a house that still has an outstanding mortgage, how does it work with debts owed?  

There are insurances that will clear the mortgage , these do not form part of the estate . There should be a death in service payment that will also be paid to the widow. Other than the house the deceased had very few assets , they would cover less than half of the known debts. 

msb1234

Is it a shared mortgage too? Also, is the house owned as tenants in common with his widow? Are the known debts solely in the deceaseds name? 

Marcon

Safety1 said:

Hi all, 
if the deceased (no will) , owns a 25% share of a house that still has an outstanding mortgage, how does it work with debts owed?  

There are insurances that will clear the mortgage , these do not form part of the estate . There should be a death in service payment that will also be paid to the widow. Other than the house the deceased had very few assets , they would cover less than half of the known debts. 

Depends how the ownership and mortgage are structured. You'd need to check with the lender about the mortgage; It's likely that there will be a charge over the 25% share in favour of the lender. You would also need to have access to the agreement between the deceased and the owner of the remaining 75% of the property to check what happens next. 

Keep_pedalling

When you say known debts are you talking about unsecured debts that are in addition to the mortgage? 

Depending on how the mortgage was set up either that will now be entirely the responsibility of the surviving borrower(s) or 25% of it is owed by the estate. In the case of the former the assets of the estate will be 25% of the value of the house, in the latter 25% of the house less 25% of the mortgage.

After the mortgage (if applicable) and funeral costs, the next call on the estate is going to be the unsecured debt.

doodling

Hi,

Who else owns the house, I assume with a 25% share the deceased owned it a tenants in common?  Is there a trust deed defining the ownership?  Are the other owners named on the mortgage?  Is the insurance specifically for the mortgage or is it more generally for the benefit of the widow?

You need to establish what the 25% share ownership in the house was actually worth (i.e. is that 25% of the value of the house or 25% of the equity in the house?).  If the insurance must be used to pay off the mortgage then the two are probably the same thing (in the other case, I wouldn't use the insurance to pay off the mortgage as you are effectively giving 25% of it to the creditors).

If that 25% share of the house is worth less than the debts then the estate is insolvent and at that point it gets very messy.  Ideally with an insolvent estate everyone would run away from doing anything with it and just leave the creditors to it.  In this case there are the other joint owners of the house to consider, until the estate is resolved then it will be pretty much impossible to sell the house and there is a risk that eventually a creditor will get fed up and force its sale.

You might find that someone ends up having to administer the estate.  Whilst it is possible to DIY, I would employ a solicitor for this.

SeniorSam

My initial question would be when did the 75% of the property passed to others take place and how and to whom? Also when was the mortgage started and by whom.

Safety1

Thanks for the replies. To try and clarify……

The house is a shared joint mortgage with wife ( not tenants in common)  When deceased was put onto mortgage it was with a 25% share (can’t blame his wife for protecting her existing home) , wife retains 75%. I can’t see where it would say if that is property value or equity on the paperwork I’ve gone through…..yet

debts are solely in deceased name, unsecured. One loan plus credit cards. 

life insurance does not appear to be linked to mortgage as it is above the value of the sum they remortgaged for, it has a nominated name to be payable to ( widow) 

assets are his cars …. One of which has been in bits for the 20plus years I’ve known him. Not high financial value (unless we could value it by the hours he has spent tinkering with it!) 

hope this helps 👍🏻

Safety1

Safety1 said:

Thanks for the replies. To try and clarify……

The house is a shared joint mortgage with wife ( not tenants in common)  When deceased was put onto mortgage it was with a 25% share (can’t blame his wife for protecting her existing home) , wife retains 75%. I can’t see where it would say if that is property value or equity on the paperwork I’ve gone through…..yet

debts are solely in deceased name, unsecured. One loan plus credit cards. 

life insurance does not appear to be linked to mortgage as it is above the value of the sum they remortgaged for, it has a nominated name to be payable to ( widow) 

assets are his cars …. One of which has been in bits for the 20plus years I’ve known him. Not high financial value (unless we could value it by the hours he has spent tinkering with it!) 

hope this helps 👍🏻

I need to double check the tenants in common bit, after rereading my reply I’m doubting what I’ve written…..I’ll be back ! 

Keep_pedalling

Safety1 said:

Thanks for the replies. To try and clarify……

The house is a shared joint mortgage with wife ( not tenants in common)  When deceased was put onto mortgage it was with a 25% share (can’t blame his wife for protecting her existing home) , wife retains 75%. I can’t see where it would say if that is property value or equity on the paperwork I’ve gone through…..yet

debts are solely in deceased name, unsecured. One loan plus credit cards. 

life insurance does not appear to be linked to mortgage as it is above the value of the sum they remortgaged for, it has a nominated name to be payable to ( widow) 

assets are his cars …. One of which has been in bits for the 20plus years I’ve known him. Not high financial value (unless we could value it by the hours he has spent tinkering with it!) 

hope this helps 👍🏻

The important thing here is the terms of the mortgage, if they were jointly and severally responsible for repayment then my understanding is the surviving borrower is totally responsible for the debt, so it is not a debt on his estate. The value of his share of the house will be 25% of the equity in it at the time of his death, so if for example the house is worth £250k and there is still £50k outstanding on the mortgage then the value of his estate (ignoring his chattels) would be £50k (25% of the equity) In this example if his unsecured debts were under £50 then the estate is solvent and  the administrator must pay them in full. 

If on the other hand he has £60k in unsecured debt then his estate is insolvent, so the creditors must be paid on a pro rata basis. Normally with insolvent estates the advice is not to administer it, as making a mistake can be expensive, however as the bulk of his estate is tied up in the marital home then that is not an option.