Dealing with debts and death
Dealing with debts and death
Dealing with the estate of a loved one is difficult enough, but it can be made harder if there are debts for you to deal with. Partner and Wills and Estates Solicitor, Emma Garfitt explains how as an executor or administrator of an estate it is important to make sure any debt is dealt with correctly.
What happens when a person dies leaving debts?
The debts do not die with the person, and they will be payable from the estate. The estate is made up of all a person’s assets, including but not limited to property, bank accounts and investments. It is the responsibility of the executor to ascertain what assets and liabilities exist and if there are enough assets in the estate to meet the debts. If there are not enough assets in the estate to pay all the debts, then the estate will be insolvent and there is a set order to pay creditors what funds there are.
Order of Priority
The funeral costs and the costs incurred in dealing with the administration of the estate will be paid first. Any other debts are then paid in the following priority:
- Secured debts e.g. mortgage
- Priority debts e.g. income tax
- Unsecured debts e.g. credit cards
Joint Debt
If a debt, such as a mortgage, is held in joint names then the liability for the full amount of the debt will pass to the surviving party.
Liability of Others
The debt cannot pass to a relative or to the executor or administrator of the estate if it was in the sole name of the deceased, unless anyone acted as a guarantor. If not all of the debt can be paid, then it will have to be written off.
Are any assets protected?
If the deceased had a life insurance policy, death in service benefit or pensions that pay on death, these payments may pass directly to beneficiaries and not for part of the estate. If they are paid directly to beneficiaries, then they cannot be used to pay of any debts of the estate.
For more information and advice regarding estate administration, get in touch with a member of our wills and estates team on 033 3344 9609 or email [email protected].
Author: Emma Garfitt, wills and estates.
