Death of a father, married with young children and debts

player

Hello,

 

I would be very grateful if anyone can offer any advice or help to us following the sudden death of our brother-in-law.

 

He passed away unexpectedly at the beginning of December at the age of 38, he leaves behind his wife and three young children (4,10,14). There is no Will in place. I am trying to help as much as I can because his wife is so distraught she isn’t able to function regards to her loss and the overwhelming administration she faces.

 

I am concerned by his financial position; it appears he has a number of borrowings in his sole name and little in the way of liquid assets. Over the past month we were able to get his bank to post his statements to us. So, I have been piecing together the financial picture. Whilst notifying various institutions we have received settlement figures from several lenders and are waiting on a handful more.

 

The borrowings for the loans, overdrafts, credit cards and car lease total over £50k. The largest being with a bank which he owes £17k via two credit cards. He has £1k in a cash ISA and virtually nothing else to his name other than his share in the family home.

 

After purchasing the title register for the house, I have established that the family home is owned by them as tenants in common. I however am unable to establish the share breakdown because there is no record of the signed lease anywhere. I would assume it to be 50/50.

 

I would estimate that his equity share in the house is worth approximately £80k. There is a joint life insurance policy to cover the mortgage (£150k) and a small pension (£25k) which will help the family in the short to medium term. My understanding is that these fall outside of his estate. I also understand that as tenants in common his share in his home falls within the remit of his estate.

 

My questions are firstly, what are the next steps I should take?

Do I notify the creditors that he is heavily indebted? Must we disclosure the share in the family home and the ownership structure? Should we now at this stage apply for Probate as administrators?

 

One lender asked if there was life insurance in place? Given the policy is joint and not a single life insurance policy, again must we disclose this information? My wife and I are deeply concerned that the creditors will be able to pursue his share in the house. Can in this instance they force a sale given the sensitive nature of the matter and the young children? Would that be a realistic route of action they would consider?

 

 

 

Thank you for any advice offered.

David

Keep_pedalling

As this is a jointly owned property and the only real asset then probate will not be required, therefore his financial situation at the time of his death never becomes a public record. 

It looks like his estate is insolvent as he has over £75k in secured debt and after funeral costs there is nothing left to pay off the unsecured debts. The insurance policy and pension pot do not form part of his estate.

The normal approach to this is to write to his creditors, and inform them that the estate is insolvent that after funeral costs there is nothing left to pay his creditors and that no one is administrating it (include a copy of the death certificate) Also write to the car leasing company tell them the same thing and request they recover the vehicle ASAP (is it being kept off road?)

elsien

Keep_pedalling said:

As this is a jointly owned property and the only real asset then probate will not be required.

It looks like his estate is insolvent as he has over £75k in secured debt and after funeral costs there is nothing left to pay off the unsecured debts. The insurance policy and pension pot do not form part of his estate.

The normal approach to this is to write to his creditors, and inform them that the estate is insolvent and that no one is administrating it (include a copy of the death certificate) Also write to the car leasing company tell them the same thing and request they recover the vehicle ASAP (is it being kept off road?)

There is half the house as an asset because it is owned as tenants in common. that is what forms the primary part of OPs question - will the wife have to sell at some point to release that share? 

Keep_pedalling

elsien said:

Keep_pedalling said:

As this is a jointly owned property and the only real asset then probate will not be required.

It looks like his estate is insolvent as he has over £75k in secured debt and after funeral costs there is nothing left to pay off the unsecured debts. The insurance policy and pension pot do not form part of his estate.

The normal approach to this is to write to his creditors, and inform them that the estate is insolvent and that no one is administrating it (include a copy of the death certificate) Also write to the car leasing company tell them the same thing and request they recover the vehicle ASAP (is it being kept off road?)

There is half the house as an asset because it is owned as tenants in common. that is what forms the primary part of OPs question - will the wife have to sell at some point to release that share? 

No, because the house has £150k of secured debt on it and they only have £160k of equity between them. 

His estate comprises of £80k in equity and £1k in savings. The first call on the estate is the secured debt so half of the mortgage reduces his estate to £6k making it insolvent. Funeral costs will wipe most of that out, so there will be nothing left for the unsecured creditors other than the leasing company who will get the car back unless his widow wishes to keep the car and take on the lease.

If the ISA is with a bank that is also a creditor then they can offset that so it will not be released to his widow.

The only saving grace in this sad story is that they had insurance to cover the mortgage so she cannot lose the house. 

elsien

What about in the future as the equity in the house improves? if the creditors wait long enough, could they chase for this in the future? Or will the husband’s half simply be transferred to the wife under intestacy  rules, and then it’s done and dusted? 

Keep_pedalling

elsien said:

What about in the future as the equity in the house improves? if the creditors wait long enough, could they chase for this in the future? Or will the husband’s half simply be transferred to the wife under intestacy  rules, and then it’s done and dusted? 

It’s the assets at the date of death that matters, his widow is now the sole owner of their home. 

GrumpyDil

Only one observation is that OP states he believes his equity share is 80k but it isn't clear if that is before deducting the outstanding mortgage or 80k after deducting the outstanding mortgage which would change the position.

BooJewels

I'm so sorry to hear of this tragic loss, what a horrible situation for the family - my condolences.

If not done so already, please ensure that your sister in law claims the Government Bereavement Support Payments - if she is in receipt of Child Benefit she should get £3,500 as an up front cash payment, then £350 per month for 18 months.

As has already been mentioned - it's very unlikely in the circumstances you describe that Probate (or letters of administration) will be required - so don't apply for it unless you really can't move forwards without it - if some party demands it.

poseidon1

No mention whether the deceased was employed and possibly entitled to a death in service payout.

player

Thank you for everyone’s input and kind words. It is very much appreciated.

 

 

His wife is now in receipt of the Bereavement Support payments. He was self-employed and there are no additional insurance policies, death in service etc. The car is now in arrears, and a default notice is to be issued before repossession. It can still be driven given the Insurance policy is still active. 

 

His basic financial affairs are as follows:

 

                                Home Value: £350k

                                Help to buy loan: -£50k

                                Mortgage: -£140k

                                ISA: £1k

                                Unsecured debt: -£50k

                                Pension: £25k

Keep_pedalling

player said:

Thank you for everyone’s input and kind words. It is very much appreciated.

 

 

His wife is now in receipt of the Bereavement Support payments. He was self-employed and there are no additional insurance policies, death in service etc. The car is now in arrears, and a default notice is to be issued before repossession. It can still be driven given the Insurance policy is still active. 

 

His basic financial affairs are as follows:

 

                                Home Value: £350k

                                Help to buy loan: -£50k

                                Mortgage: -£140k

                                ISA: £1k

                                Unsecured debt: -£50k

                                Pension: £25k

First off I have to apologise I was having several senior moments this morning so please ignore everything I said above. 

Based the above his estate actually contains  £190k secured against the home and they had £160k in equity. So the gross value of his estate is as follows. This assumes that there is no trust deed in place defining something other than a 50% split and that the home is definitely held as TiC.
   
50% Equity in their home £175k
Savings                             £1k 
50% of the Mortgage.     -£75k
50% of Help to buy loan  -£25k
Unsecured debt.              -£50k 

Total                                  £26k

So not insolvent, as I originally said. This does not mean however that his creditors are going to attempt to force a house sale. For advice on how to approach his creditors I would speak to one of the debt charities such as Stepchange.

https://www.stepchange.org/?gclsrc=aw.ds&gad_source=1&gad_campaignid=12348298277&gbraid=0AAAAAD1toAjQNaGAzjPVvv6Wvzh7vCeUR&gclid=EAIaIQobChMI3taP78ibkgMVkpJQBh00EyoXEAAYAiAAEgIjwfD_BwE