Statute Barred Debts - Making a Will and Dealing With Estate

[Still Waving]

Hi

When making a Will is it necessary or adviseable to tell the solicitor about statute barred debts as liabilities?

When the executor deals with the estate of a deceased person, are they bound to settle SB debts, whether listed in the will or not?

My assumption is that if a debt is SB, and one has no intention of paying it, then there is no point raising it when making the Will. Further, that the executor would be entitled to turn down a demand should an opportunistic SB creditor turn up post mortem.

I may be mistaken on these points. Any help please?

[Roger]

Hi

When making a Will is it necessary or adviseable to tell the solicitor about statute barred debts as liabilities?

When the executor deals with the estate of a deceased person, are they bound to settle SB debts, whether listed in the will or not?

My assumption is that if a debt is SB, and one has no intention of paying it, then there is no point raising it when making the Will. Further, that the executor would be entitled to turn down a demand should an opportunistic SB creditor turn up post mortem.

I may be mistaken on these points. Any help please?

I am not a lawyer BUT in general these are UNSECURED DEBTS hence dying with the person. Very different if there is a charge on Property or a third party guarantor etc.. Normally WILLS aren't concerned with Day to Day debts but it would make sense I think to advise of SB or indeed not yet SB where these are perhaps relatively close to the date the WILL raised.

But others may have different experiences off course

[Still Waving]

I am not a lawyer BUT in general these are UNSECURED DEBTS hence dying with the person.

They die with the person in the sense that the family of the deceased cannot be held liable if there is nothing left in the Estate after Duties, funeral expenses, etc. But the question relates to where there would be funds in the Estate. I probably didn't make that clear in my original post.

[Roger]

They die with the person in the sense that the family of the deceased cannot be held liable if there is nothing left in the Estate after Duties, funeral expenses, etc. But the question relates to where there would be funds in the Estate. I probably didn't make that clear in my original post.

You did but the situation isn't really any different from other Unsecured Debts which might be outstanding at your demise!
Except of course to leave advice and distinguish between SB and or contested.
BUT the determinate for SB will be that status at the time of Probate not when the WILL is drawn up.

https://probate-a-will.co.uk/2021/01...disclosed-debt
"..
Most people will have some form of unsecured debt when they die, but often there is enough in the estate to pay off this debt without any problems. On the repayment order, unsecured debts are one of the lowest priorities. Other things must be paid before unsecured debts can be addressed. These include inheritance tax and other tax debts as well as secured debts.
.."

[Still Waving]

With respect, I was aware of pretty much all of that, but a more pertinent section from your link is

"Undisclosed debts

Undisclosed debts are the worst kind of debts for an estate. These can be debts that the deceased has forgotten exist. They can also be debts that the deceased was aware of but had no paperwork for so the executor has no knowledge of them until the creditors come forward.

Even if you have paid off all the other debts and distributed the remainder of the estate amongst the beneficiaries, any undisclosed debts have to be paid – even if it is out of your own pocket." (My Bold for emphasis)


Going back to my original question - in such circumstances, if the accounts are SB while the person is alive, do they become payable by law from the Estate of the deceased? Or, is there still no legal obligation to pay them? This assumes the debts were SB prior to the drawing up of the Will.

[Roger]

If you think about this people Die owing monies on UNSECURED DEBTS such as Credit Cards, Bank accounts etc..
Well the WILL is an extension of you and your Estate as at your Demise.
SB means exactly that it doesn't cease to be SB on your Death!
That's not to say that a debt cant be contested in which case it might be necessary for the Executor to prove SB or otherwise.
But the same will apply of course applies to all alleged or otherwise debt claims on an Estate.

But I do think that it makes sense to store evidence of SB along with other information for the benefit of your Executor!
I am thinking of your Utility Bills and Priority Bills. Your Executor will need to be aware of these along with Bank and account details.
So a list of your Diary Debts with notes will be very useful!

[Still Waving]

I have yet to find a definitive answer to this on an authorititive website. They all stop short at saying that things such as credit card debts should be settled after the priority debts. To protect themselves from personal liability for any unknown debts, executors are recommended to advertise the death in the London Gazette and the deceased's local newspaper, which gives creditors 2 months and 1 day to come forward with a claim.

I think to be safe I must get some basic advice from a solicitor.

[Roger]

I think it is always a good idea and wise to take advice over Probate

IHTM28381 - Inheritance Tax Manual - HMRC internal manual - GOV.UK (www.gov.uk)
IHTM28381 - Liabilities: law relating to debts: legal background


The general rule is that in valuing a person’s estate you take into account all liabilities that are in existence at that time, IHTA84/S5 (3). The main exceptions to this rule are

• funeral expenses (IHTM10371) and
• foreign administration expenses (IHTM27050).

This means that probate fees and other costs of administering the UK estate are not allowable since they are incurred after the death.

For Inheritance Tax purposes a liability is defined by IHTA84/S5 (5) as

• a debt imposed by law (such as tax, fines, penalties and council tax), or
• a debt for which the deceased received consideration (IHTM28382) in money or money’s worth to the extent that money or money’s worth was received.

All debts must be capable of being legally enforced (IHTM28383) except for debts that are statute-barred (IHTM28384).

The normal rule is that the amount to be deducted is the actual amount of the liability. But there are two exceptions to this rule:

• debts that are payable at a future date (IHTM28110) and
• contingent liabilities (IHTM28070).

You should also bear in mind that if there is a right of reimbursement in respect of a liability a deduction can only be allowed if there is no realistic prospect of obtaining that reimbursement, IHTA84/S162 (1).

There are some specific rules (IHTM28391) that tell you against which property or title a deduction may be given.

[Still Waving]

Those links seem to be useful, thanks Roger.

I followed the rationalisation in your previous posts, but sometimes what seems rational is not necessarily the position in law.

The best course seems to be for the Executor to advertise the death as mentioned earlier in order to cover themselves. If no debt purchasers crawl out of the woodwork, all well and good. If they do, and the Executor is clear that the debts are SB, it seems from those links that it is the Executor's choice whether or not to settle.

[Roger]

Those links seem to be useful, thanks Roger.

I followed the rationalisation in your previous posts, but sometimes what seems rational is not necessarily the position in law.

The best course seems to be for the Executor to advertise the death as mentioned earlier in order to cover themselves. If no debt purchasers crawl out of the woodwork, all well and good. If they do, and the Executor is clear that the debts are SB, it seems from those links that it is the Executor's choice whether or not to settle.

I like your thinking because these DBA's are now global Multi National Groups and by taking advice you can make certain that the Status of your Debts (with evidence) is known to the Executor so that any attempt by these sharks can be driven off!

[Gerry Jemitus]

Unsecured debts can be challenged, this is something we do quite often for executors. The debts do not need to be statute barred to challenge. If a unsecured debt is unenforceable it is unenforceable I.e. statute barred) for the estate's benefit too.

Another issue with secured debt is that creditors try and charge for interest for the whole lifetime of say the charging order including on consumer credit judgments where in reality the interest is either not due or limited to the previous 6 years.

[Night Monkey]

I debated this on an AAD thread when we wrote our mirror wills a while ago, because I could foresee a situation where my daughters could be presented with apparently valid demands for 'old debt' settlements should the worst happen and simply pay them from the estate, partly because they wouldn't know any better and partly because they'd have enough to be dealing with anyway.

Ultimately we decided to file the wills away safely away with an additional note in the same envelope explaining which 'debts' were currently UE, and including JCS contact details so they could be contacted for advice and engage them if necessary.

That should make life easier, as much as we hope nothing untoward happens.

[Still Waving]

Hi Gerry

Thanks for your input.

As might be guessed, I was enquiring for my own situation. The debts I had when I joined AAD in 2012 are all now Statute Barred. I don't now have a credit card, and have no debts, paying for everything as I go along. I wanted to be reassured that, having escaped the clutches of the debt purchasers, they were not going to be able to get their hands on any funds from my estate when I am gone.

[Night Monkey]

I wanted to be reassured that, having escaped the clutches of the debt purchasers, they were not going to be able to get their hands on any funds from my estate when I am gone.

Exactly my situation. I've just dug out the advice from Di when I was considering this:

If a debt is unenforceable when you're alive, it will be unenforceable when you're no longer alive. Either it is or it isn't.

My suggestion is you establish which debts are unenforceable and staple the information to your Will so whoever is dealing with your affairs will be armed with the information when the time comes.

If you haven't paid or acknowledged the debts for six years before you die then they will become Statute Barred whether they're enforceable or not. If you make offers to settle you will restart the Statute Barred clock.

I should also say there are more ways a debt can be unenforceable than just the credit agreement. So if you've been told your MBNA credit agreement is enforceable that doesn't mean that they or PRA have complied with all their other statutory duties.

I agree that all too often a solicitor will simply pay bills of the deceased without question possibly because they don't have the knowledge of consumer credit which is a specialist area of law.

[Still Waving]

"I agree that all too often a solicitor will simply pay bills of the deceased without question possibly because they don't have the knowledge of consumer credit which is a specialist area of law."

..... Or because it's the easy thing to do. I have read online ...


A PR can be liable for waste, known as devastavit, if he distributes assets in the estate before paying or making provision for the debts of the estate. This is so, even if the PR acted in good faith and was unaware of outstanding debts. A PR will also commit a devastavit if he pays a debt that does not have to be paid but not if he pays a debt barred under LA 1980. This is because LA 1980 relates only to the time for barring a claim. It does not do away with the debt, which still remains.


Not sure if that is wholly accurate, but food for thought.