Dealing with small insolvent estate without applying for probate or letters of admin

[Vitamin33]

Hello again everyone
Firstly, thank you again to those who responded to my last post. This site is the best, just amazing there are genuine souls willing to assist complete strangers.
I'm still trying to help my friend deal with her late mother's estate, which as I said in my last post is insolvent. There's about £3k in cash, and a wedding ring, no property as living in rented accommodation, but quite a few creditors, circa £29K owed to Barclaycard, Cabot, Moorcroft (debts of her late husband, which she was paying off monthly via Step Change). She was in her 80s. Based on the following I just found on Citizens Advice website, it looks like my friend does not have to apply for grant of probate or letters of administration, which would be great as she's stressed enough as it is, but if that is the case, is there anything official she has to do? We've put a notice in gazette in case other creditors out there, and written to the creditors enclosing death certificate. Is it just a case of her creating a list of the assets and debts, and then, after deducting funeral and house clearance and admin costs, distributing the rest pro-rata to the creditors? My question really is can she just deal with this, with my help, in a logical way, by writing to creditors and furnishing them with list of assets etc? Below is what I got from CAB site, and she ticks three of the boxes, estate is just cash, amount is small and estate is insolvent. Many thanks in advance for any/all help, guidance, tips, etcetera
Do you always need probate or letters of administration

You usually need probate or letters of administration to deal with an estate if it includes property such as a flat or a house. Otherwise, you may not need probate or letters of administration if:

• the estate is just made up of cash (that is, bank notes and coins) and personal possessions such as a car, furniture, and jewellery
• all the property in the estate is owned as beneficial joint tenants This property automatically becomes wholly owned by the other owner
• you had a joint bank account
• the amount of money is small
• you discover that the estate is insolvent, that is, there is not enough money in the estate to pay all the debts, taxes and expenses
• there are certain life insurance policies and pension benefits in the estate.

[ostell]

I think you will find that the costs of funeral etc will be more than the estate. Keep a very good record of the accounts just in case the creditors come looking.

When registering the death the registrar will probably have given your friend a contact for resolving things with government department.
Write to all the know creditors explaining the situation and enclose a copy of the death certificate. Some may want an actual death certificate, just to be awkward. Tell them that the estate appears to be insolvent and there will be no debts repaid. There is no need to go into detail at this time. If there is some left over then you can write to them again if required.

If the cash is in a bank account the your friend may be able to put herself on the account or move the cash into a new account in her name. Again death certificate will be required.

Some utilities are superb and handle everything very efficiently, others, like Virgin, are a pain to deal with. Even refusing to speak to the executor until they have spoken with account holder. I kid you not!

[Vitamin33]

I think you will find that the costs of funeral etc will be more than the estate. Keep a very good record of the accounts just in case the creditors come looking.

When registering the death the registrar will probably have given your friend a contact for resolving things with government department.
Write to all the know creditors explaining the situation and enclose a copy of the death certificate. Some may want an actual death certificate, just to be awkward. Tell them that the estate appears to be insolvent and there will be no debts repaid. There is no need to go into detail at this time. If there is some left over then you can write to them again if required.

If the cash is in a bank account the your friend may be able to put herself on the account or move the cash into a new account in her name. Again death certificate will be required.

Some utilities are superb and handle everything very efficiently, others, like Virgin, are a pain to deal with. Even refusing to speak to the executor until they have spoken with account holder. I kid you not!

Thanks very much, Ostell, good tips and advice I think the bank have transferred the bank account money to my friend already, prob because it was such a small amount. I'll ask her about death registar and government depts. Not sure about her mobile phone... "Even refusing to speak to the executor until they have spoken with account holder." How utterly crazy can you get!! Thanks again, appreciate your time.

[Vitamin33]

Dealing with small insolvent estate without applying for probate or letters admin 2

Today, 19:48:PM




Hello all

First, thank you Ostell for your response and advice to my last post: I'm still trying to help my friend deal with her late mother's estate, which as I said is insolvent. There's about £3k in cash, and a wedding ring, no property as living in rented accommodation, but quite a few creditors, circa £29K owed to Barclaycard, Cabot, Moorcroft (debts of her late husband, which she was paying off monthly via Step Change). She was in her 80s.

She/we've now written to all the creditors and put an ad in the gazette, but she's concerned about what she needs to provide to each of the creditors to get matters sorted out once and for all.
LIke I say, her mum's estate is tiny, about £3k in a bank account and that's it. She rented same place for 49 years, and the furniture was tat and my friend had to pay to get it taken away. She has some constume jewellery and a wedding ring. Her clothes had to be disposed of due to Covid and charities not being willing to accept them. My friend has paid for house clearance, and house cleaning (she only had a few weeks before needing to give flat back).

I'm wondering, hence this post, if she can send a simple letter to each creditor, enclosing a list of assets and liabilities, e.g. copy of her mum's bank statements showing outgoings and balance when she died, and her mum's rent book or similar to prove she was renting, and a list of stuff my friend has paid for, such as for death certificates, house clearance, etc, and a list of creditors, not by name, but anonymised by amount. And a total of the value of the estate, which will be maybe £1000 BEFORE any creditors receive anything, and add that each creditor will be eligible to receive a pro rata amount of what is left, which will prob be no more than £200 for each one.

Would this approach be sufficient? The estate is so small my friend has not applied for formal probate. The other fly in the ointment is that she cannot find the will. She recalls seeing one which named her as sole beneficiary (she's the only child) which is academic given debts. Can she explain this in the letter, e.g. 'I recall seeing a simple will that named me a a beneficiary but I have since lost it, perhaps I threw it out inadvertently'

I am going to help her draft the letter, if indeed a letter is adequate. She could add a simple witness statement saying all facts are true.

I'd be grateful if anyone can tell me if I'm on the right track with this, as my friend is getting quite stressed about the paperwork. She has heard from HMRC that no tax is due, and looks like her mum is due a bit of pension, probably her last payment or something which my friend is sorting out.

Thanks a lot.

[des8]

I was writing as below on your other thread when I noticed this one with ostell comments.
I haven't read back so apologies if I duplicate ,
all I've done is cut and paste my meanderings on to here


If the debts were her late husband's why was she paying them off?
If they were not her debts, would her estate still be insolvent?

Settling an insolvent estate is not as straightforward as you suggest.
See here: https://www.insolvencydirect.bis.gov...Insolvents.htm

The Administration of Insolvent Estates of Deceased Persons Order, 1986, comes into play.
Your friend needs to obtain a grant of letters of administration, so she can then apply for an Insolvency Administration Order
A Trustee will then be appointed to control the Estate.

It might seem overkill, but settling an insolvent estate can become expensive if the administrator makes a mistake

[Vitamin33]

I was writing as below on your other thread when I noticed this one with ostell comments.
I haven't read back so apologies if I duplicate ,
all I've done is cut and paste my meanderings on to here


If the debts were her late husband's why was she paying them off?
If they were not her debts, would her estate still be insolvent?

Settling an insolvent estate is not as straightforward as you suggest.
See here: https://www.insolvencydirect.bis.gov...Insolvents.htm

The Administration of Insolvent Estates of Deceased Persons Order, 1986, comes into play.
Your friend needs to obtain a grant of letters of administration, so she can then apply for an Insolvency Administration Order
A Trustee will then be appointed to control the Estate.

It might seem overkill, but settling an insolvent estate can become expensive if the administrator makes a mistake

Thanks Des. Money is tight, and estate has £3k in it, and debts were her mum's but she told her daughter she effectively inherited them from her late husband years ago, so presumably in joint names. My friend can't afford to spend money. Can she just let go of everything and let the government deal with it? She has begun the process, trying to be helpful, puttting ad in gazette and writing to creditors to say hardly any money to go round and giving them a copy of death certificate (I helped her draft those) but it is really stressing her out, and she already works full time. She would prefer to walk away if she can. Thanks for any pointers.

[des8]

I've now read back and it is possible to deal with the estate as already suggested, i.e. be careful and pay the debts in following order:
a. Secured creditors.
b. Reasonable funeral, testamentary and administration expenses
c. Preferred and preferential debts
d. Unsecured creditors (paid pro-rata if there are insufficient funds to pay all creditors in full).
e. Interest due on unsecured loans.
f. Deferred debts eg informal loans between family member

Also watch out for DWP to suddenly turn up looking for overpaid benefits from tears past!

It's just that I'm risk averse and tend to use belt and braces.
as she has already "intermeddled" in the estate she cannot walk away

The estate value is less than £5000 so obtaining letters of administration would be free, but the cost of petitioning for the IAO is around £280 (I think)
It is not a process often used, but it does remove risk (and stress) from the estate administrator.
A statement of affairs will have to be submitted to the official receiver who then has responsibility for dealing with creditors etc
The main drawback is that the receiver's admin costs are paid before all others (including funeral costs)

As creditors have already been approached, perhaps just wait a bit and see how it develops.
Make sure all admin costs are recorded meticulously, together with receipts for everything (even postal charges) as advised by ostell

[Vitamin33]

I've now read back and it is possible to deal with the estate as already suggested, i.e. be careful and pay the debts in following order:
a. Secured creditors.
b. Reasonable funeral, testamentary and administration expenses
c. Preferred and preferential debts
d. Unsecured creditors (paid pro-rata if there are insufficient funds to pay all creditors in full).
e. Interest due on unsecured loans.
f. Deferred debts eg informal loans between family member

Also watch out for DWP to suddenly turn up looking for overpaid benefits from tears past!

It's just that I'm risk averse and tend to use belt and braces.
as she has already "intermeddled" in the estate she cannot walk away

The estate value is less than £5000 so obtaining letters of administration would be free, but the cost of petitioning for the IAO is around £280 (I think)
It is not a process often used, but it does remove risk (and stress) from the estate administrator.
A statement of affairs will have to be submitted to the official receiver who then has responsibility for dealing with creditors etc
The main drawback is that the receiver's admin costs are paid before all others (including funeral costs)

As creditors have already been approached, perhaps just wait a bit and see how it develops.
Make sure all admin costs are recorded meticulously, together with receipts for everything (even postal charges) as advised by ostell

HUGE thanks for this detailed reply Des8, very grateful to you. I have told her to keep a detailed log of everything she's spending, including postage costs. The funeral has already taken place and Barclays paid for it out of her bank account, before transferring balance to my friend, who has since paid for stuff like house clearance and house cleaning and death certificates, etc. Could a receiver ask my friend to foot the bill for all this,? She couldn't afford to pay it. I like your idea about waiting. Letters have been sent to each creditor explaining situation, that there is very little in the pot. Moorcroft have already written back (they were representing a company called Arrow chasing the smallest of the debts which is less than a grand) to say they have closed their books on it, so presumably it's gone back to Arrow. I suppose it will come down to whether the companies who are owed a lot; mainly Barclays - two barclaycard debts and a barclay loan and Cabot, decide to spend more trying, to no avail, to get blood out of a stone. I realise they might, and that a lot of this stuff is automated. Anyway, thank you again for your guidance and advice.

[des8]

I would still be concerned about those Barclaycard debts.
Credit card holders may add another as an additional cardholder, but the liability for the total debt remains with the account holder.
There is no such thing as a joint credit card account.
Barclays may well have taken her for a ride!
Similarly if the loan was in the husband's sole name , his wife should not end up paying for it.

It might be worth doing some digging and high level complaining

[Vitamin33]

I would still be concerned about those Barclaycard debts.
Credit card holders may add another as an additional cardholder, but the liability for the total debt remains with the account holder.
There is no such thing as a joint credit card account.
Barclays may well have taken her for a ride!
Similarly if the loan was in the husband's sole name , his wife should not end up paying for it.

It might be worth doing some digging and high level complaining

That's a REALLY good point Des8, thankyou. I will tell her and help her draft letters asking for proof the debts were in her name. Cheers