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What Bills Have To Be Paid After Death

What Bills Have To Be Paid After Death Image

When a person dies, you may believe the funeral costs are the only thing you have to cover, but there could be outstanding debts you are unaware of. This article looks at what bills have to be paid after death. 

Shropshire Funerals are independent, family-run funeral directors based in Oswestry, Shropshire. Our trusted team of experienced funeral directors are here to guide you through each step at difficult times.

What happens to debts when someone dies?

It can be an incredibly upsetting time if you know a person who has died, especially when ensuring you have enough money to arrange their final wishes. Besides funeral expenses, you may be liable for paying unpaid debts and owed money on behalf of the deceased person. 

However, if the outstanding debt is in the deceased person's sole name and there are no assets to pay debts with, you are not held personally liable to pay them back. Surviving relatives do not have to take on the deceased's debts unless they are also registered under the account. 

If joint tenants or guarantors hold the deceased's debts, the surviving person in that instance must start paying bills covering the deceased person's share. 

The living individual must pay jointly owned utility bills. Any assets in the person's estate, whether joint or sole, can become liable for repaying. If there are not enough assets, this becomes a different matter to handle, and you will benefit from legal advice.

Firstly, you will receive a personal representative from the court in the form of an 'executor' or 'administrator'. An administrator typically only gets involved where there is no written will. They will help you deal with the estate and pay back debts. 

Debt when someone dies

Regardless of if you are the husband, wife or civil partner of the deceased, you are not legally required to pay all the debts unless they are joint debts from which you are the surviving owner.

A person's 'estate' consists of the total cash in bank accounts, including that from a life insurance policy, property, personal possessions and any investments. 

Where no valid will has been written, family members will work alongside the person handling the account, whether that's an administrator or executor. 

Council tax debt is very common after the death of an individual, and there are different ways of navigating paying it back. When staying in a rental property alone, the liability to pay back the council tax returns to the owner or leaseholder, not the deceased. 

While the property remains unoccupied, it remains exempt from council tax payments for landlords. If you lived with the dead and owe council tax, you are legally responsible for continuing with payments. However, you can claim a 25% discount if you are the only other adult in the property. 

All of this may seem daunting, which is perfectly normal. An established process can guide you through these distressing times, starting with signing up to 'Tell Us Once'. 

This government service allows you to contact most government organisations simultaneously, ensuring all relevant parties know what they need to. Similarly, you can use the Death Notification Service to inform building societies, banks and financial institutions of the death of a person.

Your personal representative knows the order payments must be made in, helping you to avoid inheriting debt and avoid creditors. 

Creditors can submit claims in local newspapers, protecting the personal representative and yourself. 

What Bills Have To Be Paid After Death?

A specific process must be followed when there is not enough money to pay off the debts. The executor will be have been allocated by the court, working through the money owed. To access the funds on the estate, your executor must apply for a grant to the Probate Registry.

The Probate Registry deals with money, property and possessions of a deceased person, ensuring all money paid is settled fairly before any shares are released to those through the will. Their responsibilities include calculating inheritance tax, collecting assets, paying debts and listing all liabilities of the deceased, among more. Inheritance tax is paid before probates can be approved but aren't payable on properties and estates less than £325,000.

Where no will was written, and there's not enough cash to pay the debts, the estate will be used to pay off the remaining total. The probate fee required for approval to access the estate can vary, but you can receive financial help if you are on a low income and cannot afford it.

If you were joint tenants over property and have priority debts you must pay, you may have to sell the property to make money. Where the assets across all the property do not cover probate fees and unsecured debts, the reselling of the land may cover those costs.

If your estate does not cover funeral costs, debts and administration costs, this is referred to as an insolvent estate. In this instance, the personal administrator on your case will have to ensure that secured creditors and testamentary expenses such as probate fees are paid before anything else. Many surviving owners choose to pay a lump sum or pay the debt in instalments where negotiations can be met.

If you and the deceased owned a stated share of the property together, with joint names on the contract, the property is split evenly. The deceased person's share is transferred to their estate and given accordingly in their will, with the remaining estate becoming yours. However, if there are outstanding debts, this will come from the deceased's estate and not affect yours. To pay creditors without selling the house, you will have to negotiate with the inherited individual who now owns the estate. Where estates become complicated, you will benefit from discussing with a probate specialist - they will have experience working with cases similar to yours.

In situations where you own the whole property with the deceased as joint tenants, their share passes automatically to you and any other owners. This isn't as good as it sounds, though, as settling utility bills and other unpaid debts comes down to you as the sole owner. The creditors demanding the money can file an Insolvency Administration Order up to five years after the death. If this succeeds, you will be forced to sell half the estate to pay the final bills, so you should discuss your options with the creditors early on.

If there are no assets, personal belongings or bank accounts you can use as an estate, you are not liable for paying the debts when not a joint account. No third party is responsible unless you were a guarantor for the deceased. In such instances, you should start by informing the companies that are requesting the money and inform them of the death, which includes providing the death certificate and contact details. In most cases, they will have no choice but to close the account.

Different debts to pay off

There are different debts that must be paid off after a person dies, each with its own processes to follow. 

Mortgages

The deceased's mortgage lender and the insurance company may have accounted for this situation, as many life insurance policies can pay off the full amount of the remaining mortgage loan with little to no trouble. 

If the life insurance does not cover it, or there is no life insurance at all, the property may have to be sold to cover the remaining mortgage costs. Many lenders will sympathise with your situation and won't force the sale of the property to pay the outstanding balance, but be wary.

Rent arrears

Rent arrears are the most serious form of rental income, made a priority debt in the instance of death. If you do not pay these, there is every chance of eviction. 

A joint tenant must pay off any rent arrears; otherwise, you will be prosecuted. Contact the land registry for more information when you are unsure of how a property is split and owned.

Fuel bills

A joint tenancy in a rented property will mean you still have to pay fuel and energy bills. Depending on the energy company you are with, you may have some insurance policy saving you money, but you are most likely liable for fuel bill arrears. 

If the deceased were the sole name on the bill, any arrears would be paid by the estate. If the estate can not cover the costs, the money will no longer be owed. Most energy companies will have a form you can complete to inform them of the death and ensure you are on the right path. 

When it comes to gas and water bills, be sure to take meter readings as soon as possible and consult your recent bills for more information. Utility companies, water companies and fuel organisations have experience dealing with such circumstances, and your executor or administrator will ensure no financial problems arise when paying back such debt. 

Personal loans, credit cards and credit debt

Typically, other debts are sorted and settled before your administrator will tackle the credit debt. Where you hold a card jointly with the deceased, the bank account and debts will become the joint holder's responsibility. 

If you are in a civil partnership or married, you should check for a Payment Protection Plan coverage. Similarly, hire purchase agreements may have a hold over some goods under the deceased person's name. Such items do not belong to you until the final payment has been made, so check your insurance policy for the credit agreement. 

You can potentially pay off the remaining balance, making these goods part of the estate to pay off other debts.

Bank account

You cannot access the money in the deceased bank account unless jointly owned until the estate has been managed and any debts paid off. Where you do own the account with them, you can typically still access the money inside the bank account. 

When there is not enough money in the estate, and you wish to pay back the debt from the bank account, this is much easier when you already have access. If the deceased's bank account is still connected to ongoing service and debt is being paid off, they should stop taking regular payments until the estate has paid the debt. 

Savings

Where there is a bank account with savings in, you can use this as repayment for the various debts. Whether this remains in a building society account or a lost bank account, your options remain open to what you do with the money. 

When you are the executor on such an undertaking, be sure to pay the debts in priority order. Mortgage debts should be paid first, especially if you don't want to sell the property and keep it in your name. The deceased may have established an endowment policy, too, meaning that a lump sum is paid after a certain period, so be sure to check for this.

Benefit Overpayments

When a deceased person receives benefits before their passing, you should inform the Department for Work and Pensions (DWP) and the local council of their death. 

There many be instances where the DWP announces too many DWP benefits issued, meaning a debt is owed. The DWP bereavement service can be consulted and help you through that process. You should do the same with HM Revenue and Customs (HMRC) after their death. 

When you find yourself struggling with any of the above issues settling bills and debts after the passing of a loved one, please get in contact with us. If the person who died left no will, we can provide advice and assist you today. 

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