Dealing With The Debts Of Someone Who Has Died

When someone dies, their debts don't necessarily become discharged automatically, which can be extremely worrying if you are the deceased's surviving spouse.  So who does have to pay the debts?  Read on to find out more.

Probate

As the deceased's surviving partner, you will have to go through a legal process called 'probate', which will be dealt with by a specialist probate lawyer.  Essentially, a grant of probate simply means that you are legally authorised to distribute the assets of the deceased in accordance with the terms of their will. 

Once the grant of probate has been received, you must use the money to settle any debts, and this must be done before any monies can be distributed to other beneficiaries under the deceased's will. 

Joint debts

In the case of debts that were held jointly between you and the deceased, there may be some insurance to settle the debt, such as with a mortgage.  In the event that there are no insurances, you should contact the lender and ask them to check the terms of the loan and, if necessary, transfer all future bills to your sole name.

Individual debts

In the case of individual debts in the name of the deceased only, contact the lender to notify them of the death.  You will need to provide letters showing details of the debts to your probate lawyer. 

Some PPI (personal protection insurance) policies include life cover that will pay out in the event of the death of the borrower, so it's worth checking the terms of such insurances with the lender.  Sometimes credit cards are covered by an element of PPI, so always check to see if life insurance is included.

If the estate is insolvent and the value is insufficient to settle all the debts owed by the deceased, you must settle what debts you can in the following order of priority:

• secured debts, such as mortgages and unsecured loans
• funeral costs and estate administration fees
• unsecured debts, such as personal loans, utility bills, rent and other taxes.

What to do if you're getting demand letters

It's not uncommon to receive demands and requests for payment from credit card companies and lenders even after you've informed them that the debtor is deceased.  This is usually due to delays in updating computer records.  Make sure you have informed interested parties of the person's death and if let them know that you are in the process of dealing with the estate.

In conclusion

Dealing with the financial affairs of a close relative who has died is never easy.  Always enlist the services of an experienced probate lawyer and ask them for advice on how to proceed when it comes to settling any jointly or individually held debts.

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