Paying off debt when a person has died

[innovationcabinet]

Hello!
Wondering if someone can advise.
A friend's mum has just died and she's in the following scenario:

1.Mum had no assets or property

1. Had a life insurance policy worth £15k but it's a whole life policy and has no named beneficiary
2. £3k of debt on a credit card
3. There is a simple Will giving personal possessions and Estate to daughter

Normally (as we understand it), life insurance policies with named beneficiaries are not included as part of an Estate but as there's no beneficiaries, we assume this money will just go into the Estate.

The question is, will that money need to be used to pay off the £3k debt?

Normally if there's no assets then the debt dies with the person but in this scenario would the life insurance money be classed as part of the cash of the estate or is it exempt?

No one's trying to dodge paying off debt of course! And if it needs to be paid then it will be. But there's conflicting advice online. Some say that life insurance never counts as part of an estate and some same that if there's no beneficiaries it does.

It's such a relatively small amount of money that it's probably not worth seeing a solicitor over.

Just wondering if anyone knows!

It depends if the life insurance policy is written in trust or not. If it is, it will pass outside the estate. Ask the insurance company- no named beneficiaries doesn’t mean it’s not written in trust.

It's complicated so if your friend is the executor, it will be worth her getting legal advice, to make sure that she handles this correctly.

My understanding is that if there is no named beneficiary and the life insurance wasn't held in trust, it will be paid to the estate, and therefore the £3k debt would have to be paid out of it, along with funeral costs. But this isn't my area of law and I'm not 100% sure, and good legal advice is always worthwhile as if your friend is the executor and gets it wrong, she could find herself liable.

If it is written in trust, I think it is only "excluded" from the estate for inheritance tax purposes which won't apply in this estate anyway.