Insolvent estates - future planning

Anticyclonic

I have reason to believe that both of my parents may leave behind insolvent estates when they die. I have read advice on this site and others that if this happens, the best thing for me and my sibling to do would be to "walk away" and not agree to be executors of either estate, leaving any creditors of the estate to apply to do this if they so choose.

My questions are:

1. Would "walking away" from the estate be practical if either my sibling or I were to be living with either parent at the time of their death; i.e. would it be impossible to avoid suggestions of "intermeddling" in an estate where the deceased's possessions are already in your house? I would know that none of it would be of any value, but any creditors wouldn't know that from the outset. Would we able to throw anything (including old paperwork) away?
2. Is there anything that either my parents, or my sibling and I, can do now, aside from the obvious remedy of clearing down the debt prior to their demise, that could make this situation less problematic to deal with in the future if it does arise?
3. Is it really possible to simply walk away from filing any paperwork relating to inheritance tax, even if it's obvious there's going to be nothing payable? Surely HMRC wouldn't let that go lightly?
4. Can we at least register the death, get the death certificate and arrange the funeral before walking away?

Flugelhorn

3. you don't need to complete or submit anything re IHT  etc as there is basically no estate to administer.
4. you can register the death and get the certificates - I think you can also arrange the funeral (if you are happy to pay for it) and then do nothing more to the estate - this certainly happened in our family, the relatives paid for a funeral and then replied to any enquiries re money to the effect that the estate was insolvent and they would not be administering it 

Marcon

Anticyclonic said:

I have reason to believe that both of my parents may leave behind insolvent estates when they die. I have read advice on this site and others that if this happens, the best thing for me and my sibling to do would be to "walk away" and not agree to be executors of either estate, leaving any creditors of the estate to apply to do this if they so choose.

My questions are:

1. Would "walking away" from the estate be practical if either my sibling or I were to be living with either parent at the time of their death; i.e. would it be impossible to avoid suggestions of "intermeddling" in an estate where the deceased's possessions are already in your house? I would know that none of it would be of any value, but any creditors wouldn't know that from the outset. Would we able to throw anything (including old paperwork) away?
2. Is there anything that either my parents, or my sibling and I, can do now, aside from the obvious remedy of clearing down the debt prior to their demise, that could make this situation less problematic to deal with in the future if it does arise?
3. Is it really possible to simply walk away from filing any paperwork relating to inheritance tax, even if it's obvious there's going to be nothing payable? Surely HMRC wouldn't let that go lightly?
4. Can we at least register the death, get the death certificate and arrange the funeral before walking away?

What an interesting and forward-thinking question - not one I've seen raised before. I wonder if any of the debt charities such as StepChange could help? You can't be the only offspring facing this possibility, although you are probably in a tiny minority of those who are willing to face up to it.

If you are sure your parents will die insolvent, then this  might be one of those rare occasions where not having a will could be useful, in the sense that any creditors who do come knocking can simply be told that 'x' died intestate and nobody is administering the estate.

Raising the issue with a responsible journalist such as Paul Lewis might yield useful results which would be of value not just to you but others in the same boat. Try https://www.bbc.co.uk/programmes/articles/1M8DssCcgjtZQlwLCrLBmpM/contact-money-box

Sea_Shell

In this scenario are you able to "help yourself" to their personal possessions, even if they are worth very little in reality?

Who technically owns them?

Anticyclonic

Marcon said:

Anticyclonic said:

I have reason to believe that both of my parents may leave behind insolvent estates when they die. I have read advice on this site and others that if this happens, the best thing for me and my sibling to do would be to "walk away" and not agree to be executors of either estate, leaving any creditors of the estate to apply to do this if they so choose.

My questions are:

1. Would "walking away" from the estate be practical if either my sibling or I were to be living with either parent at the time of their death; i.e. would it be impossible to avoid suggestions of "intermeddling" in an estate where the deceased's possessions are already in your house? I would know that none of it would be of any value, but any creditors wouldn't know that from the outset. Would we able to throw anything (including old paperwork) away?
2. Is there anything that either my parents, or my sibling and I, can do now, aside from the obvious remedy of clearing down the debt prior to their demise, that could make this situation less problematic to deal with in the future if it does arise?
3. Is it really possible to simply walk away from filing any paperwork relating to inheritance tax, even if it's obvious there's going to be nothing payable? Surely HMRC wouldn't let that go lightly?
4. Can we at least register the death, get the death certificate and arrange the funeral before walking away?

What an interesting and forward-thinking question - not one I've seen raised before. I wonder if any of the debt charities such as StepChange could help? You can't be the only offspring facing this possibility, although you are probably in a tiny minority of those who are willing to face up to it.

If you are sure your parents will die insolvent, then this  might be one of those rare occasions where not having a will could be useful, in the sense that any creditors who do come knocking can simply be told that 'x' died intestate and nobody is administering the estate.

Raising the issue with a responsible journalist such as Paul Lewis might yield useful results which would be of value not just to you but others in the same boat. Try https://www.bbc.co.uk/programmes/articles/1M8DssCcgjtZQlwLCrLBmpM/contact-money-box

Thank you for your considered response. I will consider contacting StepChange and Paul Lewis, and if I do and they respond, I will let this thread know.

Brie

Anticyclonic said:

My questions are:

1. Would "walking away" from the estate be practical if either my sibling or I were to be living with either parent at the time of their death; i.e. would it be impossible to avoid suggestions of "intermeddling" in an estate where the deceased's possessions are already in your house? I would know that none of it would be of any value, but any creditors wouldn't know that from the outset. Would we able to throw anything (including old paperwork) away?
2. Is there anything that either my parents, or my sibling and I, can do now, aside from the obvious remedy of clearing down the debt prior to their demise, that could make this situation less problematic to deal with in the future if it does arise?
3. Is it really possible to simply walk away from filing any paperwork relating to inheritance tax, even if it's obvious there's going to be nothing payable? Surely HMRC wouldn't let that go lightly?
4. Can we at least register the death, get the death certificate and arrange the funeral before walking away?

1. If you own your home or are the named tenant then your parent's death should have no financial impact on you. Obviously if you are living in your parents' home then there's the problem of dealing with the landlord (assuming they rent) as you are not the named tenant.  Either way though a creditor will only know about what is in a home if you allow them or their representatives in the door.  That's why the line is to never let debt collectors or bailiffs in so they cannot start taking an inventory.  Some might try to film through the doorway but you are within your rights to stand in the way and to tell them to cease as you are not the person who owes money.  
2. Obviously if there are no debts there's no problem.  Most creditors I've seen seem to take things at face value so if told there's no money they will probably run a credit history to see if there's a savings account or something or masses of other debt and then likely write things off.  It would take an obvious asset like savings or a house to make them stick around.
3. The "tell us once" service used when registering a death will prompt HMRC into any required action but if that's to say money is owed you go back to the line of "insolvent".
4. Arranging funerals seem to get the first crack at any spare cash there might be on death.  So if a pension payment is received there seems to be an expectation that it might be used for the funeral.  Do check though if it's paid in advance because you accessing the money even to pay for the funeral might cause the pension provider to decide YOU have taken the money belonging to your parent and so YOU need to pay it back to the pension provider from your own pocket.  (hope that makes sense)

Anticyclonic

Brie said:

1. Most creditors I've seen seem to take things at face value so if told there's no money they will probably run a credit history to see if there's a savings account or something or masses of other debt

Thank you for your answers. What do you see as their reaction to finding "masses of other debt"?

Silvertabby

Just to confirm - the house is definitely rented?  

Brie

Anticyclonic said:

Brie said:

1. Most creditors I've seen seem to take things at face value so if told there's no money they will probably run a credit history to see if there's a savings account or something or masses of other debt

Thank you for your answers. What do you see as their reaction to finding "masses of other debt"?

Generally the more debt someone has the less likely any one creditor is going to get their money back. If they do get anything is likely on a pro rata basis.  At least that's what happens normally if someone is getting debt advice and they have a small amount available to pay towards their debts.

So if a creditor is owed £200 and another owed £2000 the first might get back 10% of the amount the second one gets.  If all that is available is £100 the first will get £10 and the other £90.  But that's just if there is some ££ hanging about.  When there is nothing to distribute a creditor will look at who else is clawing for something.  If there's 2 creditors they might stick around and see what's possible, if there's 30 creditors they are more likely to just cut their losses and do a write off.  Every action a creditor takes costs them money so sometimes just walking away is better economically.

Thinking about the overall situation - it sounds like your parents aren't about to be applying for any credit any year soon.  So if each of their individual debts amount to no more than £30k, they don't own their own place, at most have a car that is very low value (£2k I think) and no real assets then maybe it would be best that they both apply for debt relief orders.  That would write off all the debts a year later and allow them to get on with their lives without so much worry.  This presumes they are of sound mind and willing to engage in such a process.  StepChange and others will provide help with this.  The alternative is to go through the debt advice process and offer token payments - £1 a month per creditor is fairly normal.  It keeps the creditors from making a fuss even though the debts will never be paid in full.  

theoretica

Sea_Shell said:

In this scenario are you able to "help yourself" to their personal possessions, even if they are worth very little in reality?

Who technically owns them?

If you have paid for the funeral, and the possessions are worth less than the cost of the funeral then it seems a get out to have a form of words and say the value of all possessions went toward the funeral - in effect you buy them off the estate and put the money to the funeral, which you would have paid for anyway. 

Mojisola

Sea_Shell said:

In this scenario are you able to "help yourself" to their personal possessions, even if they are worth very little in reality?

Who technically owns them?

Technically personal possessions remain part of the estate but, in practice, who apart from the family is going to know what small items the deceased had and whether they had been gifted to family members while the deceased was still living.

My mother went through a stage where she stuck names on the bottom of her knick-knacks and told us that they belonged to us but we couldn't have them til after her death.