Dealing with a loved one’s debts after they have passed away
Dealing with the practical tasks after someone has died can be time-consuming, difficult, and distressing, even more so if you were very close to the person. It may feel intrusive to be looking into their financial affairs and very upsetting if you discover things they kept private, such as debts.
If you’re struggling, try speaking openly to a family member or friend who can support you through this difficult time. If you’re unable to find someone who can help, there is practical advice and support available.
We partner with the National Bereavement Service, which provides practical information and advice and emotional support to anyone who has experienced the death of someone close to them.
Speaking with creditors
Most banks and utility services have specific departments for helping bereaved people. You don’t need to feel embarrassed about contacting them if there are debts. This is a very common situation that they deal with frequently.
If you’re uncertain about the size of the estate and the amount of debt when you contact them, you just need to say that you’re investigating the estate and that it may be insolvent, and you’ll be in touch again when you know more.
What happens to debts when someone passes away?
If the debts are solely in the deceased person’s name and they have no assets, the debts will not be owed by anybody else.
You don’t have to pay someone else’s debt unless you owed the money jointly with them or if you were a guarantor of their debt. You have no legal or moral obligation to do so if it was just the individual that owed money.
If the debts were joint or someone has acted as a guarantor, the debt will be passed to the other joint owner or guarantor who will now be liable for those debts. If you need any advice regarding this, we can provide free advice.
If there are any assets, such as property, land, money in the bank and/or personal possessions, the debts have to be paid from the estate before any beneficiaries can receive anything. This is the responsibility of the executor if there is a Will or the administrator (usually the closest family member) if there is no Will, i.e., the estate is intestate.
What happens to paying for the funeral if someone has died with debts?
The funeral expenses are the priority debt on an estate with the important exception of secured debt, such as a mortgage.
It’s essential that the funeral is modest if there are debts. An estate cannot be used to purchase an elaborate funeral to avoid paying creditors. If this is done, the creditors may hold the executor or administrator liable for maladministration and pursue them for the outstanding debt.
If you can pay for the funeral and are willing to do so from your own funds, be aware that you may not be able to recover this money from the estate later. Don’t incur debt yourself to pay for a funeral.
For more help on funding for a funeral visit Down to Earth (provided by Quaker Social Action). Please be aware that it is very difficult to raise money for a funeral after it has taken place.
What happens to energy bills after someone has passed away?
It’s important to contact the supplier as soon as you can. Most providers will have an online form you can complete, which will ask for contact details, details of the person who has passed away, whether gas/electricity will continue to be used at the property and any details of the executor of the estate. You can also give them a call.
If the property is jointly owned or rented, the person still living there will be liable for ongoing bills. If the energy bill was in the name of the deceased person’s sole name, any arrears should be paid by the estate. If there isn’t enough money to do this, the money will no longer be owed.
What happens to water bills after someone has passed away?
It’s important to contact the supplier as soon as you can. Most providers will have an online form you can complete, which will ask for contact details, details of the person who has passed away, whether water will continue to be used at the property and any details of the executor of the estate.
You can also give them a call if you find this easier. If there’s a joint occupier, they will be responsible for the ongoing bill and the name on the bill should be changed by the water provider.
If there are any arrears, the joint-named person will become liable for these. Water arrears are a non-priority debt, and the provider can’t disconnect if there is someone still residing at the address.
If the water bill was in the deceased person’s sole name, any arrears should be paid by the estate. If there isn’t enough money to do this, the money will no longer be owed.
What happens to council tax after someone has passed away?
You should get in touch with your local council as soon as possible.
Council tax arrears are a priority debt if the council have secured a charge on the property and the respective council will want the ongoing council tax paid, plus an extra amount to clear any arrears.
If the rental property was solely occupied by the person who has passed away, liability usually falls to the owner or leaseholder. Alternatively, if the property was solely owned by the person that has passed away, it will be exempt from paying council tax, on the assumption it remains unoccupied until probate is granted.
Once probate is granted, a further six-month exemption may be possible if the property remains unoccupied.
If the person who has passed away lived on their own, any arrears will be paid out of the estate. If there isn’t enough money to do this, the money will no longer be owed.
A partner of the person who has passed away will be responsible for the ongoing bill but can claim a 25% discount if they are the only adult in the house.
They will also be liable for any council tax arrears if they were living in the house, even if their name is not on the bill. If the person wasn’t named on the bill, the council will have to send a new bill in their name before they can recover any outstanding council tax.
What happens to credit card debt after someone has passed away?
Credit cards are in sole names, so there are a few things to take into consideration. The credit card debt will need to be paid for by the estate, or by a protection plan if they had one.
If the credit card had an additional authorised holder, the card mustn’t be used, and the additional cardholder will need to apply for a new card in their own name. Contact the provider as soon as you can.
What happens to a bank account after someone has passed away?
It’s important to notify the bank as soon as possible. The bank can freeze any accounts that are solely in the deceased customer’s name. This prevents any unauthorised transactions or additional interest charges from taking place.
It protects the deceased person’s money until the estate has been sorted. In the case of joint bank accounts, the joint account holder will still be able to access the funds. However, it’s still important to notify the bank so they can update their records and cancel any bank cards that were in the name of the deceased person.
If they had more than one account with a bank, with some in credit and some overdrawn, or a loan, the bank is entitled to aggregate the accounts. If this results in a debt, the bank will probably keep the money in the accounts in credit as part payment of the debt.
What happens to a mobile phone contract after someone has passed away?
Speak to the provider as soon as you can. Most mobile phone providers have a dedicated team to help support bereaved customers. The team can help with closing an account or arranging a transfer to a new account.
The contract will usually only terminate if the mobile phone provider is notified of the customer’s death. The person responsible for informing the provider of their death is normally the executor or personal representative for the deceased estate.
What happens to an unsecured loan after someone has passed away?
If the debts were in the deceased person’s name only, these debts will be written off, providing they didn’t have any assets such as property, land, money in the bank and/or personal possessions.
If the loan was in joint names on the credit agreement, the person who’s still living will now become liable for repaying the full amount of the loan. It’s important to notify the loan provider as soon as you can about the situation. Most providers have an online form you can complete to keep them informed – or you can give them a call.
Why might probate be needed if there are debts to be paid from the estate or it’s insolvent?
Asset holders such as banks may ask for probate to release funds to an executor or administrator before they are able to pay debts.
If the overall level of debt is small and the estate is insolvent, i.e. the amount of debt is greater than the total of any assets, it may be sufficient to explain to the creditors that the estate is insolvent and they will write off the debt.
If the estate is complex and/or the debts are large to several organisations, don’t try and deal with the situation without taking advice. Dealing with an insolvent estate can be complicated with a hierarchy of how creditors are paid and in what proportions. You should take professional advice, or you may accidentally become liable for the debts if you deal with everything incorrectly.
Dealing with finances whilst also coping with a loss can be overwhelming, and along with the National Bereavement Service, we’re here to help you. You can also get in touch with us.
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