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Mortgages & Other Debts


It is important to establish if there is a mortgage on the property. This should be evident from a review of bank statements as there will be a monthly payment. Mortgages are often covered by life insurance on the lives of those parties to the mortgage. If a life insurance policy cannot be located try the mortgage provider or check the bank statements for monthly premiums being paid. If life insurance is identified notify the life company as soon as possible of the death of the insured and send a copy of the death certificate. If there is no life cover the debt will still have to be repaid.

If the property is owned as joint tenants (which most properties are) any debts on the property will pass to the surviving owner and if they cannot be settled it may be necessary to sell the property. If the property is owned as tenants in common then the deceased’s share will pass to another party but this can only happen once their share of any debts has been settled.

Other debts

Debts that the deceased had at the date of their death form part of their estate. With joint loans the surviving party takes over all of the value of the loan. Surviving spouses and civil partners are not however responsible for the debts of the deceased unless they were joint loans.

You will need to inform the lender of the death of the deceased as soon as possible to stop repayments being chased. This can be done by letter with a copy of the death certificate. Check with the lender whether there is any payment protection cover in the event of death which will settle any outstanding liability.

All debts must be repaid out of the estate before the beneficiaries of the will receive anything. If there are insufficient funds in the estate to settle the debts then no payments can be made to the beneficiaries. If there are insufficient funds and any property is jointly owned with the deceased then the surviving owner can be liable for debts of the deceased.

If the property is owned under a joint tenancy it passes automatically on the death of the deceased to the other party. However creditors of the estate can apply for an Insolvency Administration Order within 5 years of the death, forcing the surviving party to sell the property and make funds available from the deceased’s share.

If the property is owned as tenants in common and there are insufficient funds, a sale of the property may be unavoidable to liquidate the deceased’s share of the property. For the reasons above it is always worth trying to negotiate with any creditors to avoid this.

Student loans

There is an anomaly with one particular debt that the deceased may owe. On death any loans outstanding to the Student Loan Company are waived and are not therefore included in the estate of the deceased. They also do not pass to the surviving partner. You will need to write to the Student Loans Company with a copy of the death certificate.

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