Practical steps: How to handle 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 are paid.

A deceased persons estate is liable for paying any or all of their outstanding debts. The estate executor or administrator takes responsibility for this.

What debts are owed after a death?

The executor or administrator will 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 generally become the responsibility of the surviving debtor, if the deceased was married or in a partnership.

The executor checks whether the deceased had any life insurance or other policies that can 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 in place to pay the funeral expenses.

Dealing with creditors after a death

All of the deceased’s creditors are advised of the death. Request a statement from each of them clearly stating how much is due. Hopefully, once the death is noted on their records, they will allow the estate some time to deal with matters.  Regular payments from a bank account should cease once the death has been notified.

Paying funeral expenses after a death

The deceased’s funeral costs are generally paid out of their estate. However the person who signs the agreement with the funeral director is liable for settling the bill if the estate cannot pay.

Any money held in a bank account, will generally be released by the bank in question to pay for the funeral. Provide them with 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 can 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 are cleared in order of priority.

Firstly, funeral expenses take priority over all other claims against an estate. Apart from where a debt has been secured against a particular asset, such as a car loan or mortgage.

Secondly, testamentary expenses are next. These are expenses in respect of the estate administration. After this comes 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. Paying creditors in the correct order is essential, otherwise they could be held personally liable if a creditor should have been paid but is missed out.

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