Debts After Death

When someone dies any private property, possessions, investments and other assets owned by that person becomes known as his or her estate. A chosen executor (as stipulated in the deceased’s will) or administrator (appointed by law if no will exists) will have this estate assembled and documented, valued, taxed correctly and finally distributed it to those who stand to inherit. This distribution will either take place according to the terms of the deceased’s will or by the laws of intestacy/succession if no will exists. Before this can happen, however, debts that are both owed by and owed to the deceased will need to be taken into account.

Debts Owed by the Deceased

When an individual dies and still owes money in debts, these amounts must be covered by the deceased’s estate. Insurance policies may be enough to pay off some debts, so always check to see if the deceased held death cover for a mortgage or some sort of payment protection cover for personal loans and/or credit card debt. Some of the debts that may need to be covered include water rates, Council Tax, utility bills, outstanding amounts on hire purchase agreements, tax debts and possibly even mortgages. Personal loans, credit card debt and other personal debts will need to be paid off by the estate as well, and if total debts can not be covered by insurance money and cash then property and personal possessions may need to be sold. If these items are sold for higher than the market value, tax may be due from the sale as well. If there is not enough value in the deceased’s estate to cover his or her debts, the debts will not necessarily pass on to a spouse or family member unless another individual was involved in joint loan with or guaranteed a loan for the deceased.

Debts Owed to the Deceased

Debts owed to the deceased are considered part of his or her estate and it becomes the responsibility of the executor or administrator of the estate to collect on these debts. Generally, however there will need to be written terms of the agreement to make it enforceable. Debts that were not stipulated in writing may be unenforceable and the money may not be able to be recouped. In fact, if loans were made on an informal basis to another individual there may not be any legal obligation for the other individual to pay them back. Business debts owed to the deceased should be discussed with a solicitor. A solicitor will also be able to advise the executor or administrator on how best to collect debts that are proving difficult to recoup.

The executor or administrator of the deceased’s estate will be primarily responsible for seeing that all debts owed by the deceased and all debts owed to the deceased are properly sorted and settled. It is highly advisable that a solicitor be involved in debt repayment and collection, though advice can also be sought from a Citizens Advice Bureau (CAB). Debts can take time to settle, so anyone expecting to inherit from the estate of a deceased friend or family member should remain patient and offer help as needed in order to smooth the process and ensure for an efficient settlement of all of the deceased’s affairs.