Life insurance when insolvent and intestate
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The_Real_Matt_Dunn
Posts: 5 Forumite
About two months ago, my father in law died. He left behind no will, and the estate is very much insolvent.
Wisely and understandably, my wife and sister-in-law have chosen not to apply for Letters of Administration due to the financial circumstances of the estate, and it is extremely unlikely that anyone else will be willing to take this on. However, from a investigation into his affairs, a life insurance policy was found, which after contacting to inform of the situation, promptly paid out directly into to my wife's bank account.
My question is this: given that my wife and sister-in-law are merely beneficiaries of the life insurance policy, and do not hold Letters of Administration, would the proceeds of this policy be deemed part of the estate, and hence required to pay off a proportion of the outstanding debts? If this is likely to be the case, and nobody is willing to take on the burden of administering the estate, how would this realistically unravel itself now that the money has been paid out?
Wisely and understandably, my wife and sister-in-law have chosen not to apply for Letters of Administration due to the financial circumstances of the estate, and it is extremely unlikely that anyone else will be willing to take this on. However, from a investigation into his affairs, a life insurance policy was found, which after contacting to inform of the situation, promptly paid out directly into to my wife's bank account.
My question is this: given that my wife and sister-in-law are merely beneficiaries of the life insurance policy, and do not hold Letters of Administration, would the proceeds of this policy be deemed part of the estate, and hence required to pay off a proportion of the outstanding debts? If this is likely to be the case, and nobody is willing to take on the burden of administering the estate, how would this realistically unravel itself now that the money has been paid out?
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Comments
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Depends on the policy - but it may be a moot point regardless.
If nobody is prepared to take on the administration of the estate (any creditor could do so, but why would they?), and the insurer has helpfully paid out to your wife's bank account, you need do nothing.0 -
Was the policy written in trust? If so then it is not part of FIL's estate.
Was your wife - his daughter - a joint policy holder? (Unusual but theoretically possible.) If so the policy now belongs to her and is not part of his estate.
If the policy was not written in trust and FIL was the sole policy holder, then the money belongs to his estate and needs to be distributed accordingly - with the creditors having first claim.
If you haven't yet established whether it's part of the estate or not and your wife is (wisely) trying to walk away from the insolvent estate, why on earth did she ask the insurer to pay it out to her? It is not as if they did so without asking her because she must have given them her bank details.
It is hardly a moot point. If the insurer has screwed up and the proceeds actually belonged to the estate, there is every chance that the creditors will want the money, unless the amount of the life insurance was trivial.Depends on the policy - but it may be a moot point regardless.0 -
Malthusian wrote: »
It is hardly a moot point. If the insurer has screwed up and the proceeds actually belonged to the estate, there is every chance that the creditors will want the money, unless the amount of the life insurance was trivial.
But if nobody comes forward to administer the estate, the creditors won't be able to claim anything until someone does decide to take on the task. That isn't likely to happen, so it's a moot point!0 -
Malthusian wrote: »
If the policy was not written in trust and FIL was the sole policy holder, then the money belongs to his estate and needs to be distributed accordingly - with the creditors having first claim.
The creditors' claims are against the estate - and if nobody comes forward to wind it up, they will never be able to access the proceeds (always assuming the money does indeed belong to the estate) because there will be nobody to authorise payment to them.0 -
But if nobody comes forward to administer the estate, the creditors won't be able to claim anything until someone does decide to take on the task. That isn't likely to happen, so it's a moot point!
How do you know it's unlikely? We don't know how much the debts are or how much the life insurance is. If both are significant - life insurance proceeds are often hundreds of thousands of pounds - then one or more of the creditors may decide it is worth petitioning for an insolvency practitioner to administer the estate.
If, in the event that the proceeds actually belonged to the estate (which we don't currently know until the OP confirms who owned the policy and whether it was in trust), the advice on offer here is to "keep your mouth shut and you might get away with it", then I have nothing to say on that front.0 -
Malthusian wrote: »How do you know it's unlikely? We don't know how much the debts are or how much the life insurance is. If both are significant - life insurance proceeds are often hundreds of thousands of pounds - then one or more of the creditors may decide it is worth petitioning for an insolvency practitioner to administer the estate.
If, in the event that the proceeds actually belonged to the estate (which we don't currently know until the OP confirms who owned the policy and whether it was in trust), the advice on offer here is to "keep your mouth shut and you might get away with it", then I have nothing to say on that front.
If the insurance payment belongs to the estate then hanging on to the money and keeping quiet about it, would be theft. If the OP want to sleep at night they need to ignore such advice. Financial institution do share information so it would be a huge risk to take.0
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