Dealing with an Insolvent Estate

[ellequick]

Hi All,

My father is terminally ill and no longer has mental capacity. In taking over his finances, we have discovered that he has approx 20k debts in the form of credit cards to various banks. He has approx 3k in his bank account and no other assets. He has 2 insurance policies - one funeral cover plan (value 4k) and one life insurance policy (value 20k) - I assume these don't form part of his estate although will have to verify this.
We have also found a will, which names me and my sibling as executors of his estate. My questions are:

1. The will is signed by two people (no idea who they are) but it's also all scribbled on in my dad's handwriting with things like "to change" and sections crossed out etc. Would that will still be considered legally binding? Who decides this?
2. Is it advisable to renounce the role of executor in this situation? And what happens if my sibling and I both do that? Are there any downsides of doing this?

I have absolutely no idea how any of this works, would really appreciate any advice.

The policies will certainly form part of the estate unless they are written in to trust for others.

Funeral costs get paid before debts.

It is usual for a solicitor (if the will was written by them) to hold the original will and give a copy to the client so it may be that copy you have found and your dad was using that to get a new one written. (Wills need witnesses so those might be the signatures you don't recognise) if your dad ever used a particular solicitor then it would be worth calling them to check if they have one. Can't help with the debt side but I'm pretty sure executors aren't liable for debts in an estate (otherwise no one would do it surely?) sorry you are going thru this

Thanks for the replies. The life insurance is in trust and the funeral policy, as you say, goes towards funeral cost which takes precedence over the debts.

There is no mention of a Solicitor's office or any other details on the will, other than the signatories names. I assume they are old neighbours of my father, I don't recognise the names at all.

Change the life insurance policy so it is not left in trust. You willneed it to pay into the estate. Ask if this is possble in the cirumstances.

Why would that be a better option? I suspect that his young stepdaughter is listed as the beneficiary - why would I try and change this rather than let the debts be written off?

No! If the life policy is in trust that's a good thing. Don't change that or it will indeed be wasted on debts that would otherwise be written off on death.

Don't do anything with the life policy (query whether you even could without a power of attorney for your dad at this point). When he dies, renounce probate. You don't want to deal with an insolvent estate, they're a nightmare and you can get in hot water if you don't pay the creditors in the correct order. There's nothing in it for you. Let the creditors sort it out if they've got the appetite for it. It's not your liability and don't let yourself be persuaded otherwise.

When he dies, renounce probate. You don't want to deal with an insolvent estate, they're a nightmare and you can get in hot water if you don't pay the creditors in the correct order. There's nothing in it for you. Let the creditors sort it out if they've got the appetite for it. It's not your liability and don't let yourself be persuaded otherwise

I agree completely with this. These are not your debts (or anyone else's) and you shouldn't accept it as such.

@PresentingPercy

Change the life insurance policy so it is not left in trust. You willneed it to pay into the estate. Ask if this is possble in the cirumstances.

Completely wrong. If the life insurance becomes part of the estate it will have to go to meet the OP's father's debts. By keeping it out of the estate it can go to whoever he has selected as the beneficiary.

Many thanks for the advice so far. I think I will have to go with the option of renouncing probate. Feels bad somehow but I simply can’t afford to get myself in financial trouble trying to sort this out, and I’m lost at what else to do.

Has anyone done this? I’m dreading the thought of a continual stream of creditors threatening me. He has 4 credit cards 😞

You just keep records, pay in the correct order and let them know there is no funds to cover any remaining debts. The debts die if there are no funds and do not pass to you. But no one can benefit until debts are settled.

You notify everyone and gather everything. It is a very easy process.

I simply can’t afford to get myself in financial trouble trying to sort this out

You don't have to meet the debts personally. As cabbageking says, you just have to pay the debts in the correct order. The creditors may be upset when they discover they are only going to get a fraction of their money back but there is nothing they can do about it.

I think you are best to renounce. There is nothing in the estate but better not to have the responsibility or hassle

It really is just an admin exercise.
Register the death and purchase some extra death certificates.
The BMD support via the phone, after registering the death will inform a range of authorities for you like DWP, council, etc . They will provide a booklet with info about who to contact, records to keep and who to pay first.
The funeral is paid first and you simply collect all bills and any credits info.
This can take months sometimes and everyone who has been notified waits.
Once you have all credits and bills you start paying them out. The info provided looks like he will break even. Anything left can them be given according to any will. There is also the issue of collecting his personal nicknacks, furniture, etc and assessing their value to cover any debts.

You need the death certificate for the funeral and this may be sent via the post due to Covid. Someone needs to register the death anyway.
In covid it is easier as many providers don't ask for evidence and everything is via phone or intetnet.

To correct cabbageking a little...

The first priority is secured debts if there are any (mortgage, car loan and the like). Once those have been paid, funeral expenses come next, then any expenses incurred administering the estate.

I don't think the estate will break even on the info given as the life insurance will not form part of the estate. You will need to contact the creditors to confirm the outstanding balances and see if any of them are willing to write off the debt. The Bereavement Advice Centre has a letter template you could use. You then need to add up all the debts (excluding any that the creditor has agreed to write off) and pay them proportionally. For example, if there are debts totalling £20k but the assets only come to £1k, each creditor will get 5p for every £1 they are owed.

I would recommend taking professional advice if you are considering renouncing.

@prh47bridge

To correct cabbageking a little...

The first priority is secured debts if there are any (mortgage, car loan and the like). Once those have been paid, funeral expenses come next, then any expenses incurred administering the estate.

I don't think the estate will break even on the info given as the life insurance will not form part of the estate. You will need to contact the creditors to confirm the outstanding balances and see if any of them are willing to write off the debt. The Bereavement Advice Centre has a letter template you could use. You then need to add up all the debts (excluding any that the creditor has agreed to write off) and pay them proportionally. For example, if there are debts totalling £20k but the assets only come to £1k, each creditor will get 5p for every £1 they are owed.

I would recommend taking professional advice if you are considering renouncing.

Just to clarify this: secured creditors only have the security over the assets over which they have security. Therefore cash in the bank should not be used first to pay off a mortgage debt. Funeral expenses always come first, but if an asset is used as security for a debt it must firstly satisfy that security before the it can be used for anything else.

Presentingpercy don't give up the day job. Quite possibly the worst piece of advice l've ever seen.

Whatever money is ‘in the estate’ can be used to pay off debts. It sounds like the only money ‘in the estate’ is the £3k in his bank account. The two insurance policies are outside of this and should not be used to repay debt. The debts cannot be transferred to the executor.
Other things ‘in the estate’ would be his personal belongings, furniture, clothing etc. What about a house?
If there’s no money in the estate, the debts simply have to be written off, but if there’s money that might be tricky deciding who gets what, there is an order to that.

The signatures on the will aren’t really important, the official will should be lodged somewhere, search national-wills. Depends how old it is. If you can understand the written notes then you could take them into consideration, but it should be the official will that is adhered to.

The signatures on the will aren’t really important, the official will should be lodged somewhere, search national-wills. Depends how old it is. If you can understand the written notes then you could take them into consideration, but it should be the official will that is adhered to.

There is no requirement for wills to be lodged anywhere in the UK. You can lodge wills with the National Will Registry but there is no requirement to do so. A will is still valid regardless of whether it has been lodged.

Written notes on the will have no effect unless they have been signed and witnessed. Do not take them into consideration.

Yea that’s why I said depends how old it is. If it’s recent there’s more of a chance that it’s lodged.
And I said you could take them into consideration, but you should adhere to the official will

When my father in law died he did not have enough money to pay his debts. There was not even enough money to pay for the funeral. I wrote a letter to his credit card company explaining that his estate was insolvent and they wrote back saying they had written the debt off. Obviously if you have some money left once you have paid for the funeral and other secured debts then you can write and offer what is left.

Essentially when someone dies once the money they have left behind is used up the debt dies with them. You are not responsible for making good their debt.

There is some good advice and template letters on Money Saving Expert.

Make sure you get at least 10 death certificates. You will need them all!

Sorry for your loss.

Apologies OP just reread your first post and see your father is terminally ill. Please forgive me.