Debts aren’t written off when someone dies

As much as all of us wish to be free of debt, even after we are gone, this is usually a wishful thinking. Many people believe financial liabilities are being forgotten when a debtor dies, but unless all his creditors die with him, no such thing happens. Remembering about financial obligations is particularly important if one is in charge of a will of a deceased or has been appointed to manage his or hers estate. It is a serious responsibility, one that mustn’t be taken lightly. If you happen to be the chosen one, it is important for you to understand, you are legally accountable. In order to insure legitimate action, there are certain steps that must be taken and an order to which one has to submit.

#1 Take stock of debt and assets. If the value of an estate isn’t very large (below £10 000) chances are you may not need any legal documents to access deceased’s money however, it all depends on individual institutions (banks, building societies etc.)

#2 Inform Bank and other financial institutions about the death. At this point all the accounts will be frozen and any Direct Debits or regular payments should be cancelled (make sure to do that).

#3 If estate consists of larger amounts of money, stocks and/or properties you will need to obtain grant of probate or confirmation (in Scotland) however, to acquire one any Inheritance Tax will have to be paid first. It is wise to consult a probate specialist at this point. He/she will also be able to help if it turns out that the estate is ‘insolvent’ (debt is larger than the value of the estate)

#4 Contact creditors and establish amount of debt. It is your responsibility to make sure that the estate is properly distributed therefore to ensure no claims can be made in the future, you must prove your efforts to reach as many potential creditors as possible. The best way to do that are announcements in local and national newspapers. From the time of notice, any potential claimants have two months and one day to come forward.

#5 In the case of ‘insolvent estate’, unless a probate specialist will advise you otherwise, this is an order in which debt must be dealt with:

1. Secure debts- mortgage, secure personal loans etc.
2. Funeral costs (those must be reasonable amounts) and costs of dealing with an estate (eg. acquiring probate)
3. Unsecured debts- unpaid rent, council tax, other taxes, overpaid benefits, water and telephone bills, credit cards, unsecure personal loans

Remember that any money of the deceased, held in join accounts will automatically go to the other person named on those accounts and will not be treated as a part of the estate. Any properties owned jointly will go to the other person named on the deed however, the value of the deceased’s share in any of those properties will be counted as a part of the estate.

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