Dealing with Debt when a person dies
Dealing with bereavement and the debt of their estate can be very complicated, emotional and stressful. There are important practical steps that you or an authorised person must take in this situation.
Registering the death
When someone dies you need to register the death, you can do this at the correct register office or register the death online. You need to check what information you need before you register a death. You must register a death within 5 days (8 days in Scotland) - this includes weekends and bank holidays.
The ‘Tell Us Once’ service passes information about a death to most government organisations on your behalf, you must register the death first. To see if this service is available in the area of the person who died visit the online ‘Tell Us Once’. service. If Tell Us Once service is not available, you will be provided with information about which organisations to contact to report the death.
You may be eligible for assistance from the Social Fund to pay for funeral expenses, if you are on a low income. How much you get, or if you are eligible depends on your circumstances. For further information, visit ‘funeral payments’.
When someone dies, their estate is made up of both their assets and their debts. Assets include:
- property and land
- money in bank accounts
- personal possessions
The person who deals with an estate is known as the personal representative. Even if thee is a valid will a special application has to be made by the personal representative, to the court to confirm their legal right to deal with the estate. This is known as probate. If the person who has died has not left a valid will, close relatives may be able to apply to court to get permission to deal with the estate. The law sets out people who can do this in order of priority, including; any surviving husband or wife, children, father or mother and so on.
The personal representative must pay debts in a certain priority order and before any payments are made to people named in the will (if there is a valid will). If people named in a will are paid before the debts, the personal representative can become personally liable. What is left in the estate after debt is paid, can then be distributed according to the will.
If the debts of the estate are greater than the value of the assets, the estate will be insolvent. Insolvent estates can be complicated and difficult to deal with. You may decide to instruct a solicitor instead of becoming a personal representative.
Creditors could apply for an insolvency administration order. This is a special type of bankruptcy which some creditors may try to use after someone has died.
If someone dies, their debts cannot be recovered if:
- the debts were in their sole name
- there were no guarantors on any of the debts
- and they have not left any assets behind.
If the person who dies has debt in joint names with someone else, the surviving person will remain liable for paying the whole amount of that debt.
If someone signed as a ‘guarantor’ for the debts of someone who has died, the guarantor will become liable for the remainder of that debt.
Owner occupier property
Tenants in common
This applies when all owners of a property each own a specific share of the property as specified in the title deeds of the property. When an owner dies their share becomes part of their estate, it does not automatically pass to any surviving owners.
Each own all of the property and when one dies their share is automatically passed to the other. Hence the individuals share does not form part of their estate and is not available to creditors, or available to distribute to anyone named in the will.
If the estate is insolvent the creditor could apply for an insolvency administration order. They have a time limit of five years from the date of death. They can also apply to court to recover the deceased person's share of the property. You can use the Land Registry search to check how a property is owned. There is a small charge for this service.
A Joint tenant who lives in the property as their main home will automatically take over the tenancy. In some circumstances a member of the tenant’s family may be able to ‘succeed’ or inherit the tenancy, providing they had been living there when the tenant died.
Benefit overpayments after death?
If someone who dies was claiming benefits, you should contact the Department for Work and Pensions (DWP) and the local authority to inform them of their death. Alternatively this can be done through the ‘Tell Us Once’ service. Sometimes the DWP may have overpaid the person who has died resulting in a benefit overpayment.If the benefit overpayment has been worked out correctly, it can be recovered from the estate. You should seek help from an advice agency if you are unsure if the decision is correct.
Further advice and contacts
Dealing with an estate after someone has died can be complicated and you may need extra support, the following contacts may assist you further:
For information about the steps to take after someone dies
For information about dealing with someone’s affairs after they have died.
HMRC bereavement helpline
For help with tax after someone dies
T: 0300 200 3300
HMRC Deceased estate helpline
For specialist advice about income and capital gains tax on someone’s estate.
T: 0300 123 1072
The independent professional body for solicitors. You can use their website to search for solicitors that specialise in different areas of law.
T: 020 7320 5650