Paying estate bills and expenses post death
Paying bills and expenses post death is part of winding up a persons estate. After someone dies, all debts must be settled. Any expenses relating to their death, including funeral costs must be paid.
When someone has died, their estate is liable for paying their outstanding debts. The estate executor or administrator is responsible for making sure this is done.
What debts are owed after a death?
The executor or administrator will need to look through the deceased’s paperwork and make a list of all creditors and what is owed. This could include utility companies, HM Revenue & Customs and credit card companies. Any joint debts will generally become the responsibility of the surviving debtor.
The executor must look to see whether the deceased had any life insurance or other policies that could be used to pay off debts. In particular, if they held an interest-only mortgage, they may have had an endowment policy in place to cover this. If there is a policy, you must notify the policyholder of the death. Ask them what forms and evidence are required so the policy can be encashed. The deceased may also have had a pre-paid funeral plan that could be used to pay the funeral expenses.
Dealing with creditors after a death
All of the deceased’s creditors must be advised of the death. Request a statement from them setting out how much is due. Hopefully, once they have noted the death on their records, they will give the estate some time to deal with matters. Regular payments from a bank account should cease once you have notified them of the death.
Paying funeral expenses after a death
The deceased’s funeral costs will generally be paid out of their estate. However the person who signs the agreement with the funeral director will be liable for settling the bill if the estate cannot pay.
If the deceased had money in a bank account, the bank will generally release funds to pay for the funeral. You will need to give them a copy of the funeral director’s invoice together with a certified copy of the death certificate. Should funds be unavailable at the time, family members may cover the cost and the estate will reimburse them later.
Order of priority for debts
Where there is insufficient money in the estate to pay off all of the deceased’s debts, debts should be cleared in priority order.
Funeral expenses generally take priority over all other claims against an estate. This is apart from where a debt has been secured against a particular asset, such as a car loan or mortgage.
Testamentary expenses are next. These are expenses in respect of the estate administration. After this are priority debts such as bills for tax and Council Tax. Finally, unsecured debts are paid last. These include credit card bills, store cards and utility bills.
When there is a risk that there will not be enough money in the estate to cover all of the bills, the estate administrator needs to be very careful. They must pay creditors in the correct order. Otherwise they could be held personally liable if a creditor should have been paid but is missed out.
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