Dealing with Deceased FinancesAfter a person's death, one needs not only to deal with the person's estate but also his liabilities like loans, mortgages, taxes etc. in case if there was a will then the executor gets assigned by law to deal with the deceased's finances. In case if there was no will, then the law might assign a family member to sort out the finances of the deceased. An executor has access to the deceased's money to be able to deal with various liabilities. Usually a probate is also drawn which legally authorizes the executors the right to deal with the deceased's estate and liabilities. In case if the estate of the deceased is less than £5000 there need not be a probate but another form called as a letter of administration.
A person's estate is made up of their cash (including the cash to be received from insurance) and investments, property and possessions. Estate is distributed after what is left post all finances are dealt with according to the will or law.
Generally the time allowed to settle deceased's finances is one year from the date of death. Also, it is advisable to take help from a professional like a solicitor to understand every aspect of the finances.
To start with, one needs access to the following documents to understand the deceased's liabilities completely:
- Tax and National Insurance affairs
- bank, building society and savings' accounts and certificates
- stocks and shares
- state and private pensions
- state benefits
- car, health, home and life insurance policies
- utility bills
- other unpaid bills
- property deeds
- mortgage payments
- rent payments
- credit card and store card payments
- loan payments and other formal debts
- Documents relating to company's information like financial statements if the deceased was self employed or business partner
Apart from all the above mentioned liabilities, there would be other payments that the executor would also need to look into as a part of settling deceased's finances. They are as follows:
- Funeral costs
- Any other outstanding bills
- Other debts owed by the deceased
- Solicitor's fees
Tips on paying off various debts:
If the mortgages are covered by life insurance, this may pay off the full amount of the loan. In case if there isn't any insurance - or if there were second mortgages not covered by insurance, then the executor needs to arrange for funds or the property may have to be sold.
2. Rent arrears
All rents due must be paid off. In case if the executor himself was a joint tenant, all rent arrears also should be paid off.
3. Water rates
This needs to be cleared by anyone still living in the house whether or not is the bill addressed to him, he is responsible for any arrears and for ongoing charges.
4. Council Tax
Council taxes needs to be followed up with anyone who is currently residing in the house. This person is going to be responsible for any arrears and ongoing charges, even if their name isn't on the bill. As we have seen before, there can be a 25% discount for second adult rebate. But in case if no one is residing in the house, council tax stops. Only arrears need to be cleared.
5. Fuel bills
If you've been living in the property jointly you may be liable for fuel bill arrears.
6. Personal loans, credit cards and credit debt
These dues should be the last ones to be settled and should ideally be done when others have been done. For credit cards & personal loans, the executor can check whether there was any payment protection cover to pay off the card debt. Or else, in case if cards are held jointly, any debts will be the joint holder's responsibility. Lastly, in case both of these options are not applicable, these need to be paid off from estate.
7. Tax debts
Any tax owed or overpaid benefits or pension would be paid out of the estate.
Money owed to a deceased person is part of their estate. As an executor, one has the right to claim the following which can be sources of money:
- tax rebates
- life insurance
- money from pension schemes- (death in service from a pension is a payment of a lump sum amount if the person dies before pension age itself)
- money from lost or forgotten pensions and savings
- capital from the deceased's business
- death cover for a mortgage
- Payment protection cover for personal loans and credit cards
The executor can be responsible for the fact that all debts were not cleared before assigning assets to the beneficiaries according to the will. Hence it is important to clear all the dues first.
If there is not enough money to pay all the debts, they must be paid in a particular order:
- The funeral expenses and fees etc (like any fees of solicitor's to handle the will)
- Taxes- HM Revenue and Customs
- The Department of Work and Pensions
- Unpaid pension contributions or wages if there were people working under the deceased.
In case if all dues are cleared in this order but there is not enough estate, then first preference for getting the assets will be the legacies, who have specific amounts mentioned against them in the will. Post this if anything is left over, it is distributed to the rest of the beneficiaries.
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