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Money Owed to and by the Deceased

By: Mike Watson - Updated: 31 Jul 2018 | comments*Discuss
 
Money Owed Owed By Deceased Will Estate

Dealing with a deceased persons Estate may often involve scenarios more complex than those envisaged. It is possible, for example, that the deceased owes money, is owed money, or even that they both owe money and are owed money! In any case this will affect the value of their Estate. We will deal here with what happens if the deceased is owed money, before considering what happens if they owe money.

Money owed to the deceased is counted as part of their Estate: Their Estate is everything they owe and are owed less anything they owe. It will in this case become the responsibility of the Personal Representative who acts on behalf of the deceased to claim back the money owed, and it will be in the interests of all the benefactors of the will that this is achieved.

Money owed to the deceased must be declared as it affects the amount of inheritance tax on the deceased’s Estate and may also impact on what is paid out under the terms of the will.

Recovering the Debts of the Deceased

Recovery of casual debts related to sales or money lent may be difficult and there will be no legal obligation on the part of the debtor to pay outstanding money. In many cases it will be difficult to prove how much of a debt is owed, and even if a debt exists at all. This demonstrates the importance of having written agreements drawn up of all significant debts owed – with no written agreement even in your life time a debt owed to you is not worth the paper it is written on, whereas a dated record of the agreement is binding: This goes for contracts of all kinds.

Be sure also to check whether the deceased may be owed things such as insurance on damage or theft of property, tax rebates, and so on.

Business debts should be recoverable, although the law regarding business debts varies depending on what type of business owes money. In the case that business debts are owed it is in your interest to seek legal advice. Your first port of call may be the Citizens Advice Bureau.

Dealing With the Debts of the Deceased

When someone dies it is often wise to advertise in the local papers for creditors, in order to see whether they are owe any money. As well as doing this, the Personal Representative must search through their personal documents and their bank accounts (or statements) for evidence of regular and ongoing debt payments. If they do owe anything then this amount must be taken from the total value of the Estate and will therefore reduce their Inheritance Tax liability.

All debts must be paid for from the Estate of the deceased, although it must be noted that this cannot be done until some Inheritance Tax has been paid on the Estate. Be sure to tell all creditors that the debtor is deceased as this will allow some reprieve from immediate payments having to be made. It is unlikely if there is ni money left in the Estate that the beneficiaries of the will need settle the debt unless it was incurred a joint debt.

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Hat22 - Your Question:
Our elderly mother has Alzheimer's and terminal cancer. She has a few rental properties but her income is less that her outgoings. My siblings and I are proposing to each put in a lump sum (around £10k each) to cover her future care costs and any outstanding bills so that we have a fund to draw on. In the event of her death, how can we ensure that our money is repaid as debts before it is taken into account for inheritance tax.

Our Response:
You need to speak to a legal/financial professional about this as we can't really give individual advice of this nature. If your mother has rental properties meaning her income is insufficient, can any of them be sold etc?
InheritanceIssues - 1-Aug-18 @ 3:15 PM
Our elderly mother has Alzheimer's and terminal cancer. She has a few rental properties but her income is less that her outgoings. My siblings and I are proposing to each put in a lump sum (around £10k each) to cover her future care costs and any outstanding bills so that we have a fund to draw on. In the event of her death, how can we ensure that our money is repaid as debts before it is taken into account for inheritance tax.
Hat22 - 31-Jul-18 @ 4:16 PM
Afriend of mine lend me money a month ago.He suddenly died a few days ago.Do I still need to pay the money back.Ther was no written agreement.
Francis - 16-Jul-18 @ 11:52 PM
A friend lent me £10,000 we wrote something down ourselves and I signed and dated it. I would pay him monthly. He died suddenly and now his siblings are trying to claim the money from me. Where do I stand? And who do I pay it to?
Nat - 12-Jul-18 @ 3:48 PM
Tutti - Your Question:
Hi my friend gave me £20,000 and didn’t want me to pay her back however I insisted I made payments. She made a will and told her solicitor it was a loan although we never wrote anything down. He has said I owe the money to her residue ? Which any left goes to a charity that she chose. Do I pay the charity? Does it have to be in one lump?! Thanks

Our Response:
You could try and contest this if it was originally a gift;if however, you made repayments, it may be difficult to prove. Seek professional legal advice.
InheritanceIssues - 16-May-18 @ 2:54 PM
Hi my friend gave me £20,000 and didn’t want me to pay her back however I insisted I made payments. She made a will and told her solicitor it was a loan although we never wrote anything down. He has said I owe the money to her residue ? Which any left goes to a charity that she chose. Do I pay the charity? Does it have to be in one lump?! Thanks
Tutti - 15-May-18 @ 11:16 AM
mother and father put a £40000 loan on the house they transferred/sold to brother.This was done formally in writing to be repaid.Both parents now deceased, there are 3 siblings with no will. Can he be asked to repay the loan into the estate as currently there is no money in the estate and there is property and land to sell which requires conveyancing etc so funds are required to enable complete liquidation of the estate? As he is a beneficiary he is requesting that this is considered as part of his inheritance
Loanandinhertitance - 27-Mar-18 @ 3:52 PM
Alice Yelland - Your Question:
My godfather wants to loan me £30,000, at a low interest rate of 1% per annum. He is elderly, so what happens when he dies? Are there tax implications? Or does the loan pass on to his wife?

Our Response:
You could consider putting some documentation in place to deal with this. If not, it forms part of your godfather's estate and whoever is responsible for administering the estate will seek to recover from you.
InheritanceIssues - 20-Mar-18 @ 10:44 AM
My godfather wants to loan me £30,000, at a low interest rate of 1% per annum. He is elderly, so what happens when he dies? Are there tax implications? Or does the loan pass on to his wife?
Alice Yelland - 18-Mar-18 @ 7:15 AM
I was wondering what would be the best way to find out if someone (individual or company) has taken, claimed or received money, or held back money from my fathers estate after his passing? He passed away a few years ago and I am this sole person responsible for his estate and assets. Upon looking through some of his paperwork, it seems like there might have been an account or two that may have been closed after his passing. As well as stocks and life insurance. I have called some of these companies but there's no record of these accounts on their end or my search seemed to get no real information. If there is a website or place I can go that could show this type of information, it would be most helpful. Any suggestions all recommendations would be greatly appreciated. Thank you, - Dennis Vaughan -
Bishop - 15-Feb-18 @ 7:46 PM
RASH - Your Question:
I gave my mother nearly £25,000 about 20 years ago to buy a share in her flat. Now she has died how do I get my money back from her Estate. I have the written confirmation from her that I gave her this money. I am one of the Executors. 2 of my siblings have agreed to pay their share of my money back with interest, the 3rd sibling is refusing to pay be back even a penny.

Our Response:
You haven't said whether it was a gift or a loan. If it was a loan, was there any documentation etc? If it was a gift you don't have any right to claim it back in the deceased's estate. When you say a "share in her flat" is your name on the deeds at all? You will probably need to seek professional legal advice on this.
InheritanceIssues - 20-Dec-17 @ 12:28 PM
I gave my mother nearly £25,000 about 20 years ago to buy a share in her flat. Now she has died how do I get my money back from her Estate. I have the written confirmation from her that I gave her this money. I am one of the Executors. 2 of my siblings have agreed to pay their share of my money back with interest, the 3rd sibling is refusing to pay be back even a penny.
RASH - 19-Dec-17 @ 4:14 PM
ian - Your Question:
I had given money to a private limited company by bank transfer. they then loaned the money for property development and would secure a charge over that property. They in turn paid me interest every month by bank.Some of it was paid by the company some of it was paid personally by the only director.Five years later he has died.How do we deal with this?I don't have any official paperwork apart from Bank statement showing my transfer to them.Emails stating that interest was being paid to me.Bank statements showing payments into my account from the company and the director personally

Our Response:
No paperwork? You say you "gave" the money to a private company, was this a gift or a loan based on what you'd get back from a future sale of the property. You can check with the land registry if there is a charge on the property, but apart from that we can't really advise - you need to speak with a solicitor/financial adviser if you can't resolve it with the company.
InheritanceIssues - 24-Oct-17 @ 9:45 AM
Dolly - Your Question:
My husband was the executor of a relative's estate, who died just over 2 years ago. The estate was finally wound up in July 2016. He has just received a letter from the local council advising that there are some outstanding care charges for the relatives home carers. Whilst they have resent a copy of a statement which states £250 is owed, is the council within it's rights to try to claim this more than 26 months after death, and more than 15 months after the estate has been settled and IHT paid? If this money is to be paid how does this affect IHT etc? I realise that this a small amount to be paid, but it is the fact that they have left it for over 2 years to follow this up.

Our Response:
Did your husband notify all the creditors at the time of death? We assume there must have been some documentation of the home carer's finances etc? The usual practice is to place a notice in the estates gazette and a local paper, this give protection against unknown claims. A deceased estates notice specifies a two-month period for claimants to contact the executor to register a claim against the estate. Once that time has expired, the executor may distribute the estate paying only the debts that they have received notice of. If a creditor misses the deadline there is recourse against the executor, but the beneficiaries can be pursued. The amount should have little impact on IHT.
InheritanceIssues - 23-Oct-17 @ 11:16 AM
I had given money to a private limited company by bank transfer. they then loaned the money for property development and would secure a charge over that property. They in turn paid me interest every month by bank. Some of it was paid by the company some of it was paid personally by the only director. Five years later he has died. How do we deal with this? I don't have any official paperwork apart from Bank statement showing my transfer to them. Emails stating that interest was being paid to me. Bank statements showing payments into my account from the company and the director personally
ian - 21-Oct-17 @ 7:51 AM
My husband was the executor of a relative's estate, who died just over 2 years ago.The estate was finally wound up in July 2016.He has just received a letter from the local council advising that there are some outstanding care charges for the relatives home carers.Whilst they have resent a copy of a statement which states £250 is owed, is the council within it's rights to try to claim this more than 26 months after death, and more than 15 months after the estate has been settled and IHT paid?If this money is to be paid how does this affect IHT etc?I realise that this a small amount to be paid, but it is the fact that they have left it for over 2 years to follow this up.
Dolly - 19-Oct-17 @ 1:59 PM
Myrtle - Your Question:
Together with my sister I have loaned someone a substantial amount of money to pay off a equity release loan on a property. I have contributed 80% my sister 20%. Although the person I have loaned the money to is considerably older than I am but it is possible that I may die before the person I have loaned the money to. Is it possible for me to cover this in my will. So if I die first the money can be recovered by whoever I leave my estate to when the borrower eventually dies. Is this the correct way of dealing with the recovery of this loan after my death?Does the borrower need to make mention in their will that the money needs to be repaid to my estate. The loan has been lodged with the land registry against the property and an agreement about the amounts loaned by each sister has been signed and created via a solicitor. Can you or anyone advice

Our Response:
Yes you can mention this in your Will but that fact it is logged as a charge against the property should mean it's covered too.
InheritanceIssues - 5-May-17 @ 11:59 AM
Together with my sister I have loaned someone a substantial amount of money to pay off a equity release loan on a property. I have contributed 80% my sister 20%. Although the person I have loaned the money to is considerably older than I am but it is possible that I may die before the person I have loaned the money to. Is it possible for me to cover this in my will. So if I die first the money can be recovered by whoever I leave my estate to when the borrower eventually dies. Is this the correct way of dealing with the recovery of this loan after my death?Does the borrower need to make mention in their will that the money needs to be repaid to my estate. The loan has been lodged with the land registry against the property and an agreement about the amounts loaned by each sister has been signed and created via a solicitor. Can you or anyone advice
Myrtle - 4-May-17 @ 4:46 PM
Di60 - Your Question:
My mum died last week and now she has been left money in somebody elses will.what do I do now?

Our Response:
Check the drafting of the other person's Will...it may name substitutions in the event of her pre-decease. If not, your solicitor might be able to advise further, but usually the gift would go to the offspring of the pre-deceased person.
InheritanceIssues - 21-Mar-17 @ 10:52 AM
My mum died last week and now she has been left money in somebody elses will...what do i do now?
Di60 - 18-Mar-17 @ 10:00 AM
Mcwhite93 - Your Question:
How would I go about receiving money owed to me from a deceased person for unpaid wages

Our Response:
Contact the executor of the deceased Will or their solicitor. Any outstanding monies/debts should be paid from the deceased's estate.
InheritanceIssues - 21-Oct-15 @ 11:10 AM
How would I go about receiving money owed to me from a deceased person for unpaid wages
Mcwhite93 - 20-Oct-15 @ 11:19 AM
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