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Payment of debt prior to probate being granted

(8 Posts)
FinancialScents Wed 19-Oct-11 11:50:06

I am posting this in both Legal Matters & Money Matters. Have namechanged, but am sure some people will recognise me - I've done so just to go some way to protect personal identity.

My DH died a few months ago. Obviously on his death all of his assets were frozen, so I could not touch any of his money (bank account in his name only) other than pay funeral expenses. Probate was granted a couple of months ago and all is fine. But something has been really bugging me.

DH had a credit card with his bank and had about £2k owing on it. Initially the bank wrote to me to say they thought he had insurance on it and that when I had Grant of Probate I should send them a copy and the balance would be paid. A month or so later (before probate was granted), they wrote again to say sorry, they made a mistake. There was no insurance and therefore they had transferred the money from his (otherwise frozen) bank account to pay it.

Now, thus far I have done nothing about it. But the more I think about it, the more pissed off I am. How come the bank could touch my late husband's assets but I couldn't? Is this really legal? Why, if all assets are frozen on death, aren't all debts also frozen? There seems to be a real imbalance here. If it is legal, is it really ethical? Thankfully I am in an ok financial position, but supposing I wasn't? Does paying off a credit card really take precedence over everything else? Over his widow and his small children? To me this stinks of banks doing everything to get their money, bugger everyone else in their wake. I don't like it and something is going to change - it has to.

Perhaps this is more of a rant from me but I would be really grateful to hear from any legal or financial experts and understand how the bank could do this.

Thank you in advance for any help you can give smile

belledechocchipcookie Wed 19-Oct-11 12:00:58

There's usually a hierarchy of what's paid out of the estate. The funeral expenses are first, then the tax man, then any bills. Any remainder is for the next of kin. There's more info on the government web site about this. It does suck. Do you have any paperwork for the credit card? Anything to say there was insurance for it? I'm afraid to say that it is legal as far as I am aware, the estate should cover all debts before the family receive anything. If there's not enough left to cover the debts then they are usually written off by the lender. This is what happened when my father died any way (I also have a law degree so know about wills and probate). We (his children) just received the goods from his flat (called chattels). All of his money (after the funeral costs) went to the bank as he had an overdraft.

FinancialScents Wed 19-Oct-11 12:11:33

Thanks Belle.

I will look into insurance, but don't think he had any - he always used to think it was such a rip off. And I am really not too bothered about the bank getting their £2k back. DH did after all spend it and it was therefore owed to them - that was actually his only outstanding debt. BUT....I just think it stinks that they were allowed to touch his assets when I had to wait for probate.

I was asked by a bank's CEO the other day if any organisation had got it right following DH's death and the only example I could come up with was my council sorting out my council tax quickly. Oh, this bank is the same company which, a couple of days after his death, appeared to do everything 'right'. Gave condolences, said they would stop the collection phonecalls, would write at a better time. Perfect response. Until a week later when they started calling my mobile asking to speak to Mr X. The only reason they had my mobile number was because I had given it to the local branch manager when I took DH's death certificate in. Makes me sooo angry. Things have got to change.

belledechocchipcookie Wed 19-Oct-11 12:21:45

My mother was in tears after the bank told her that they would be taking all of the money out of my father's account so there wouldn't be enough to pay for all of the funeral. She'd already cancelled the flowers and car before she'd spoken to me so I didn't have the opportunity to tell her they were wrong.
I am fairly sure they would have needed to wait for probate to be granted before touching anything but it wouldn't have made any difference to the outcome.

It's a stressful time for you and they have not made it any easier. I'm so sorry.

belledechocchipcookie Wed 19-Oct-11 12:23:58

www.direct.gov.uk/en/Governmentcitizensandrights/Death/Preparation/DG_10029799 this was helpful.

FinancialScents Wed 19-Oct-11 12:44:02

Thanks Belle.

Gonzo33 Wed 19-Oct-11 14:17:10

www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingDebt/DebtsAndArrears/DG_10013093

This page may well help too.

FinancialScents Wed 19-Oct-11 15:25:14

Thank you Gonzo, the following from that link perfectly clarifies why I am feeling peeved about this:

Personal loans, credit cards and credit debt
Repayment of these debts must wait until others have been settled. If cards are held jointly, any debts will be the joint holder's responsibility - but check to see if you're covered by a payment protection plan.

Bank account
If this was in the person’s sole name, no one will be able to touch the money until the estate is sorted out. If you had a bank account in joint names, you can still usually use the account.

So therefore, I believe the bank was wrong to grab the money for the credit card debt from DH's current account before probate was granted: the bank could not have possibly known whether or not other, higher ranking, debts were outstanding. The more I think about this, the angrier I get. It is little wonder banks have such a bad reputation for being greedy, money grabbing bastards at the moment.

So that along with the cock up with them calling my mobile and asking for DH are very good grounds for complaint I think.

The mindset of these organisations really has to change.

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