LEGAL Advice What To Do About Debt Wh.En Someone Dies

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  • 1. THE UK INSOLVENCY HELPLINE WHAT TO DO ABOUT DEBTS WHEN SOMEONE DIES When someone dies, debts are F • The surviving owner could be ordered to pay the recoverable from any assets or outstanding debts or risk having the house sold. money left behind. This is known Half of the sale proceeds, after any mortgages were as the “estate”. No one else has to A cleared, could be used to pay creditors unless the pay for the debts unless they are court agrees there are exceptional circumstances. already liable under the terms of This makes it very important that a surviving owner the original agreement, eg the debt C negotiates with any creditors to make arrangements is in joint names or someone has to pay the debts back and avoid this procedure signed as a guarantor. Dealing with being used. an estate can be complicated. You T may need legal advice. This factsheet provides information to help you decide basic Tenants in Common what to do about debts. • If you owned the property as “Tenants in Common” the property has to be formally transferred to the surviving owner. It is not S THE HOME automatically transferred. In this case, if there are debts, then the deceased H MORTGAGED HOUSE person’s share of the house would be used to pay off the debts. After the debts are paid, the person’s share When you buy a house in joint of the house goes to whoever they left it to in a will. If E names there are two types of there is no will, then there are set rules for who will be ownership status you could have. treated as next of kin and inherit the estate. E Joint Tenants How to Check T • It used to be the case that if you To find out whether you are Joint Tenants or Tenants owned property as quot;Joint in Common, you would need to contact the Land Tenantsquot; then the property Registry to see if any restrictions on inheritance or would pass automatically to the “succession” were registered. You can also check with surviving owner. This meant your original conveyancing solicitor to find out. If the property could not be sold your house is owned as Tenants in Common, you to pay off debts. From April N 2001 the rules have been changed. It is now possible for creditors to apply for an would need to find out if there is a will. The joint owner of the property could come to an arrangement to pay off the deceased's debts to stop the house being O sold. They may have to take over the mortgage, or take quot;Insolvency Administration out a new mortgage to keep the house. This would be Orderquot; within 5 years of the particularly important if they are living in the house, or person dying, which effectively are going to inherit the person’s share of the house. splits the property down the 21 middle as if it were a quot;Tenancy in Commonquot;. What to do about debts when someone dies. 1
  • 2. Fuel Bills What if your name is not on the mortgage? If there is jointly-owned or rented property, the person If someone is living in the house who is not a part still living there may be liable for fuel arrears. owner or married to the person, check if there is a will Sometimes the fuel board tries to argue that you have leaving the house to them. If not, then there may be a “benefited” from the fuel used so should pay for it, problem staying in the house permanently. Specialist even if your name is not on the bill. This is a difficult legal advice from a solicitor will be needed. area. Phone us for advice. Otherwise, the bills are recoverable from any estate. Rented Homes If anyone is still living in the house they should If there is someone else living in the property, they arrange for the ongoing fuel bills to be put in their may be able to take over the tenancy. Joint Tenants name. automatically take over a tenancy. Otherwise a husband/wife or partner, or even a member of the Water & Council Tax tenant’s family, may be able to “succeed” or inherit the tenancy, if they have been living there when the tenant Water rates would be paid out of any estate, unless died. The time you have to have lived with the tenant someone else lives in the house. A joint occupier will is different, depending upon the type of tenancy. automatically be liable for any arrears, even if their Check the tenancy agreement. You can contact name is not on the bill. They will also be responsible Shelterline on 0808 800 4444 for advice on housing for the ongoing bill. issues or phone us for advice. Council tax liability stops if no one is living in the house. Tell the council as soon as possible. A partner Rent Arrears of the person who died will be liable for any council tax arrears, even if their name is not on the bill. If you take over the tenancy, this does not mean you They will also be responsible for the ongoing bill, but are liable for any previous rent arrears, unless you will be able to claim a 25% discount if they are the were a Joint Tenant. Payment for rent arrears should only adult in the house. come out of any estate. You will, of course, have to pay the current rent. HIRE PURCHASE AGREEMENTS Benefits Hire purchase agreements are only usual for cars and some household goods. The goods do not belong to The Department for Works & Pensions (DWP) should you until the last payment is made. It is very important be informed of the death and any order books returned to check the agreement to see if it is Hire Purchase straight away. If you do not inform the DWP before returning goods to a creditor, as the creditor immediately, there may be overpaid benefits that then would need a court order for the return of the goods, if have to be paid back out of the estate. The council over a third of the agreement has been paid. Also, you should also be informed, if the person was claiming might be returning goods that actually belonged to the Housing Benefit or Council Tax Benefit. There may be person who died and that should be part of the estate. arrears of benefit owed to the person which can still be Phone us for advice. claimed. There may be help available from the Social Fund for CREDIT DEBTS funeral expenses, if you take responsibility for the funeral and you are on particular benefits, such as: Creditors have to wait until the estate is sorted out, Income Support, income based Job Seeker’s then ask for payment. You may have to negotiate Allowance, Pension Credit, Housing Benefit or payments to avoid losing your home, if the house Council Tax Benefit. You can also claim if you are on forms part of the estate and could be sold to pay the Working Tax Credit with a disability element or Child debts. If it is clear that there is little or no money in the Tax Credit if your award is higher than the basic estate, write to the creditors and suggest they stop family element. Contact the DWP for advice. pursuing the debt, e.g. write the debt off. Remember: you are not liable to pay the debt out of your own income unless you signed the agreement as a joint borrower or guarantor. What to do about debts when someone dies. 2
  • 3. . THE ESTATE USEFUL CONTACTS You may need to check if there are any of the The following organisations may be of help to you: following: Age Concern England • Bank Accounts: If this was in the person’s sole Astral House name, no one will be able touch the money until the 1268 London Road estate is sorted out. If you had a bank account in London SW16 4ER joint names, you can usually still use the account Head Office: Tel No: 020 8679 8000 and should make sure all the direct debits and Information Line: 0800 00 99 66 standing orders for household bills are still paid, or www.ageconcern.org.uk separate arrangements are made. Cruse-Bereavement Care • Pensions: Check if there was any personal pension, 126 Sheen Road or an occupational pension through work. There Richmond may be a lump sum, or insurance policy, that pays Surrey TW9 1UR out on death, or a continued pension for Tel No 020 8939 9530 dependants. Helpline: 0870 167 1677 www.crusebereavementcare.org.uk • Life Insurance: Check if there was any life insurance. The mortgage may be paid off by an National Association of Widows insurance policy, or automatically through an 48 Queens Road endowment policy. Coventry CVI 3EH Tel: 02476 634 848 • Income Tax: The Inland Revenue needs to be contacted. There may be a tax rebate due if the Lesbian & Gay Bereavement Project person was employed or self employed. Any tax Vaughan M Williams Centre arrears owed would be paid out of any estate. Colindale Hospital London NW9 5HG PROBATE Tel 020 7403 5969 Someone who deals with everything owned by the The Department for Works & Pensions (DWP) person who dies is called the “Personal publish a useful booklet called “What to do after a Representative”. If the estate is complicated, someone Death in England & Wales”. This is available from may have to obtain “Probate”. This gives official your local DWP or Post Office. permission to deal with assets and pay debts. To find a solicitor, go to your local Citizens Advice If you may have to apply for probate, you should talk Bureau, or check The Community Legal Service to a solicitor who specialises in dealing with estates Directory by contacting Just Ask on 0845 608 1122 or and wills. It may be a good idea to see a solicitor if through the website: www.justask.org.uk. there are assets but there is no will. You will need to check the rules on who will inherit when no will was made. These are called the “Intestacy Rules” REMEMBER: You can always contact us for advice about any difficulty you have in dealing with your debts. Freephone: 0800 074 6918 Website: www.insolvencyhelpline.org © Copyright Money Advice Trust (updated March 2004) Whilst we endeavour to keep our factsheets as up to date as possible, The UK Insolvency Helpline cannot be held responsible for changes in legislation or for developments in case law since this edition of the factsheet was issued. What to do about debts when someone dies. 3