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How to deal with the debts of someone who has died
When someone dies and you are left as the personal representative of their estate, you will have to deal with any debts they may still have owing whether it is a mortgage or a credit card bill. Debts do not die when the person does, they will need to be paid and in some circumstances, any property owned may need to be sold.
Executors of the will are responsible for paying off any debts that are outstanding and they should inform creditors of the situation and deal with all the debts outstanding before giving out any inheritance to those set to inherit.
If you find yourself dealing with the affairs and estates of somebody who has died, it can be very complicated and for this reason we would recommend you take specialist legal advice if you feel ‘out of your depth’.
Indeed if you have been named as an executor and cannot or do not wish to act, you can ‘renounce’. To do this either contact the local Probate Registry Office or a solicitor.
There are different types of personal representatives to deal with an estate dependent on the situation at hand; these are:
A valid will – The personal representatives in this situation will be known as executors. Probate will need to be applied for usually when the estate is worth over £5000. Once probate has been granted, the executors should carry out the instructions left in the will after any debts have been paid.
A will that is not valid or has technical faults – This could happen for a number of reasons such as when the executor named has died themselves. In this case, there would be an administrator who would apply via letters of administration to deal with the will on behalf of the deceased – usually the next of kin. Once granted, the administrator will deal with the will in the same way an executor would with a valid will.
No will left – There will be an administrator in this situation who will apply to deal with the will via letters of administration – this will usually be the next of kin. Once granted, the administrator deals with the estate, paying off debts in a specific order, usually secured debts then unsecured debts. Any money left will usually be distributed from the administrator to the family members/close friends.
What should you do?
Gather together relevant information
A good place to start is bank and credit card statements which will list all incomings and outgoings of accounts held by the deceased. Inform creditors, banks etc. that the account holder has died and you are going through probate/administration. Also, provide them with relevant information, such as a copy of the death certificate and any letters relating to probate/administration.
Check what assets there are
This could be real estate, cars or life insurance policies. If a policy is in place, contact the insurance company to claim and once the money has been received you can use it to pay off a specific debt.
Paying off debts
In your initial contact with creditors, inform them of the situation and provide them with the necessary paperwork. Once probate or letters of administration has been granted, you and any fellow personal representatives should deal with the debts that have been left.
Usually, secured debts such as mortgages (one secured against an item/asset) are paid back first with unsecured debts such as credit cards and personal loans, coming after. These should be dealt with from money in the estate before money is passed out to those set to inherit as stated in the will.
For further information and for questions/queries regarding the legalities surrounding death, get in touch with a solicitor.