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Can you bequeath a debt in your will?

34 replies

Dilbertian · 03/06/2022 15:31

If you have lent someone money, what happens if you die before it is repaid to you?

OP posts:
LIZS · 03/06/2022 15:32

I thought the estate could claim debts.

Winterhail · 03/06/2022 15:34

Not sure what you would do with it, if you're dead. Unless there's an entry fee into the afterlife now. But maybe they take Visa.

SpiderinaWingMirror · 03/06/2022 15:45

They owe it to your estate instead.

Dilbertian · 03/06/2022 15:56

Can you specify the person who will collect on the debt, or does it have to be part of your general estate? Say, for example, you lend someone £100,000 to be paid back, with interest, in 20y time. But 5y later you die. Does your estate call the debt in immediately? Or does it hang around for 20y, unable to be properly wound up?

OP posts:
yesthatisdrizzle · 03/06/2022 16:25

You need to speak to a solicitor.

TargusEasting · 03/06/2022 16:40

A debtor is an asset of the estate like any other money debt. A bank account with a positive balance is a debt owed by the bank to the deceased and it is then owed to the estate which personal representatives will call in. A personal debtor (ie money lent) may need to recovered though and if so what are the terms? If there is nothing in writing the debtor may say it was a gift to get out of repaying it.

Dilbertian · 03/06/2022 17:02

Please don't worry, this is all theoretical! Dc and I were talking about how in mediaeval times money lenders were sometimes killed during riots as it could be a convenient moment to wipe out the debts people owed them. It seemed unlikely that this loophole would still be accessible nowadays.

OP posts:
PerkingFaintly · 03/06/2022 17:08

Isn't this the plot of many novels? Someone dies and their debts are all called in, and it provokes a crisis.

Or the capital in which they've had liferent (ie the right to live off the interest during their life) is now due to be paid to the ultimate inheritors and – horrors! – turns out it's all disappeared.

Basilbrushgotfat · 03/06/2022 17:56

Well that's me told.

I thought all debts were legally wiped when a person died 😂

Dilbertian · 04/06/2022 14:34

If the terms of the debt are repayment on X date, can it be called in by the executor ahead of that date as part of winding up the estate?

OP posts:
TargusEasting · 04/06/2022 14:43

It depends what the hypothetical medieval document you are referring to says.
Otherwise it is an asset like any other asset and will come with rights and obligations. Nothing in writing and you have problems or the debtor does because it could be demanded.

Fleur405 · 04/06/2022 14:47

In your example, where the loan is not repayable for 20 years, no it can’t be called up early and so the executor would have to wait 15 years to fully wind up the estate. However any vaguely sensible loan agreement would say that the loan is repayable on demand so this scenario can be easily avoided.

anyway, as a lawyer I can confirm that sparking a riot and killing the person who loaned you the money would not be an effective way of cancelling your debt (unless of course it was a secret debt that no one other than you and the now deceased lender knew about….)

Dilbertian · 04/06/2022 15:02

In that case, can the lender bequeath the debt to someone, for them to collect at the end point of the loan?

OP posts:
TressiliansStone · 04/06/2022 15:15

Dilbertian · 04/06/2022 15:02

In that case, can the lender bequeath the debt to someone, for them to collect at the end point of the loan?

I've definitely seen bonds (ie debts) be bequeathed in wills.

Sometimes they are bequeathed to the debtor (in practice meaning the debt is forgiven). On other occasions they just become part of the general estate, but I think on one occasion I've seen different bonds being bequeathed to different children.

Morph22010 · 04/06/2022 15:19

Dilbertian · 03/06/2022 15:56

Can you specify the person who will collect on the debt, or does it have to be part of your general estate? Say, for example, you lend someone £100,000 to be paid back, with interest, in 20y time. But 5y later you die. Does your estate call the debt in immediately? Or does it hang around for 20y, unable to be properly wound up?

I would imagine is you were lending that much for that long you’d have a proper agreement drawn up by a solicitor which would mention what happens on death of lender

TressiliansStone · 04/06/2022 15:22

This will was written in 1816, and the inventory made in 1817 when the testator died. The documents contain both a specific deb,t and standard text to give the executors authority to collect debts.^

Follows the Inventory
In the first the said Umquhill Peter Fothringham had pertaining and belonging to him at the time of his deceased foresaid the Sum of five pounds Sterling part of the Sum of three hundred and thirteen pounds fifteen Shillings and Sixpence Sterling contained in a promissory Note granted by Thomas Ogilvy Fothringham Esquire of Pourie to the defunct dated the thirteenth day of May one thousand eight hundred and Sixteen years Extending some[?] partial Sum of five pounds Sterling herein given up and Confirmed in Scots money to Sixty pounds

[...]

Follows the Defuncts Disposition and Settlement

Know all men by these presents that I Peter Fothringham Esquire Advocate Do give grant Assign and Dispone to and in favor of Mrs Mary Kerr or Ogilvy Fothringham my mother in liferent for her liferent use allenarly and Miss Anne Elizabeth Fothringham, my Eldest Sister, and her heirs Executors and Assignees, in fee my whole heritable and moveable estate of whatever description debts both heritable and moveable, Sums of money household furniture of all kinds, arrears of Interest, rents or annuities, lying money and all other means and effects of whatever nature or denomination presently pertaining or belonging or which may be pertaining or owing to me at the time of my death Together with all Bonds bills promissory Notes Obligations contracts Amounts and other writs and Securities concurred or that can any ways be interpreted in my favor, with the whole vouchers and Instructions thereof writts and Deeds granted and diligence and execution used for payment and security of the same, dispensing with the generality hereof and admitting these presents to be as Valid and effectual to all intents and purposes as if every particular generally above conveyed were herein Specially engrossed And particularly without prejudice to the generality foresaid the whole means effects and Sums of money due and belonging to me contained in an Inventory or List thereof, signed or to be signed by me as relative hereto, with the whole vouchers instructions and grounds of the said debts and all that has followed or may be competent to follow thereon;

Bollindger · 04/06/2022 15:42

If you owe someone, I think it has to be repaid when you die, from your estate.
In the same way money owed to the person is owed to their estate, and the contract still stands but the money goes to the heirs.

TressiliansStone · 04/06/2022 15:44

This is the 1815 inventory of a merchant who imported grain to Bo'ness for the Edinburgh market, and also opened a distillery to make more immediate use of the grain.

Inventory of the personal Estate of Mr. Andrew Tod merchant in Boness who died upon the 31st day of May 1875 with Interest due on principal sums at that date.

1st Cash found in his Repositories £9. –
[...]
4 Two seventh parts of a share of £100 in Alloa Tontine valued with Interest at £41.11.1

5 Principal sum in personal Bond by Thomas Thomson of Alloa and in a relative Disposition in security pro tanto by him & Mrs Wilson of Boness £1454. 7. 5
In[teres]t due at 31 May 1815 £575. 4. 5

But the deceased granted an obligation to discharge the debt on payment of one half thereof – vide one half — 1014. 15. 11

6. The following Debts due upon open account vizt by The Exe[cuto]rs of Andrew Cowan Kirkcaldy £109.10 8
Thomas Cowan Boness 10. –. –
Janet Jopping Boness 5. –

And £234. 8. 7 of old debt due by Bailie Pocock & Co[mpany] Bankrupts but quite desperate and irrecoverable.
[...]
The deceased farther died possessed of a personal Bond by James Tod lately residing at Peddleton near Dorsit now at [blank] in England for £725. with some arrears of Interest but extinguishable both principal and Interest upon recovery of £1000 St[erlin]g or 8000 Sicca rupees of the Stock of the Governor & Com[pan]y of the East India Comp[an]y assigned in security of said debt and payable on the decease of the said James Tod the debtor now aged 67 years or thereby – the present value of which debt may not exceed 750. —

Viviennemary · 04/06/2022 15:45

See a solicitor. If a formal agreement exists for the debt to be repaid then it can probably be enforced against the estate.

TressiliansStone · 04/06/2022 15:50

If you really want to see an exciting financial arrangement, look up Tontines...Grin

www.historic-uk.com/CultureUK/Tontines/

Dilbertian · 04/06/2022 15:57

Those are challenging reads! Translation? Please 🙏

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Dilbertian · 04/06/2022 16:01

Tontines - what a weird form of gambling!

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Overthewine · 04/06/2022 16:04

This reply has been withdrawn

This has been withdrawn by MNHQ at the poster's request.

Dilbertian · 04/06/2022 16:18

If there's no collateral in the loan agreement, does that make it an unsecured debt?

If I understand it correctly: if I have a written contract that says I am lending Mary £10,000, at X rate of interest, to be paid off in full on 1 Jan 2040, and I pop my clogs in 2023, that's it, the debt is written off. Lucky Mary, unlucky MiniDilbertians and the cat sanctuary.

But if our written contact states that Mary puts up her heirloom diamond tiara as collateral for the £10K I'm lending her, then the MiniDilbertians and the cat sanctuary have something to look forward to.

I still don't understand what happens to the secured loan.

OP posts:
Plantstrees · 04/06/2022 16:39

I think there is some confusion here:

The loan to Mary is not written off if you die. She owes the money to your estate or your heirs regardless of whether it is secured. Your Executor can call in the loan or pass the debt to whoever inherits your estate.

If Mary dies, then the debt will be written off if she doesn't have enough assets to repay the amount owed. If there are enough assets, eg her house, that will be sold to repay your loan regardless of whether or not it is secured. If there are not enough assets to pay all the debts, the secured debt is paid first, along with HMRC and some others.

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