Debts after death

Use this fact sheet to:

• find where to get the support you need;
• understand if you may be liable for someone's debts when they die;
• understand how home ownership is affected by a person's death; and
• find out what kind of bills and debts might need dealing with.

If you have been affected by bereavement, it’s important that you get the emotional support you need. The Cruse Bereavement Care freephone national helpline is staffed by trained bereavement volunteers. Call them on 0808 808 1677.

The sample letter mentioned in this fact sheet can be filled in on our website.

Steps to take after someone has died

Trying to sort things out after the death of a loved one can be distressing. If you find you are struggling, try and find a friend or family member that can help you.

If you are unable to find anyone who can give the help you need, MoneyHelper offer practical advice and support to anyone following bereavement. They cover a range of topics such as what you need to do straight away after a death, registering the death and arranging the funeral.

One of the first things you’ll need to do is register the death, this needs to be done at a register office very soon after it happens. There are rules about which register office to use. See GOV.UK to find out how to register the death in more detail.

Tell Us Once

Speak to your Register Office about the Tell Us Once service, this passes information about a death to most government organisations. You report the death once and the Tell Us Once service tells most government departments. Go to GOV.UK to find out if your local register office uses the Tell Us Once service. The information you find will also tell you which organisations to contact to report the death if the Tell Us Once service is not available.

DWP bereavement service

The Department of Work and Pensions (DWP) bereavement service will check all the DWP benefits the person who has died was receiving. The service can also check whether the next of kin can apply for bereavement benefits or a funeral payment. You can contact the service on 0800 731 0469. Please go to our Help with Funeral costs and benefits section for more information on what help you may be able to get if your partner or spouse has died.

HM Revenue and Customs (HMRC) Bereavement Helpline

HMRC can share details of the deceased's tax affairs with the person dealing with their estate. The later section Dealing with the estate for information on who can deal with the estate. Information HMRC can provide includes details of:

• any penson or employment income;
• details of any bank accounts; and
• copies of the last tax return (if the deceased was in Self Assessment).

Contact HMRC’s Bereavement Helpline on 0300 200 3300.

Trading businesses

If the person who has died was running a business, you may need to notify business contacts that could be affected by their death. This is likely to depend on the circumstances of the deceased and how their business was set up. Examples of contacts that you may need to notify include:

• employees;
• an accountant or bookkeeper;
• any other person involved with running or managing the business;
• suppliers and service providers;
• a landlord; and
• customers.

If you are not sure who needs to be contacted, consider seeking specialist legal advice. You can find a solicitor through the Law Society.

HM Revenue and Customs (HMRC) will normally find out about the death from the Registry Office or the Tell Us Once service if you have used it. If you do not hear from HMRC within 30 days of the death being registered, you should contact HMRC’s Bereavement Helpline on 0300 200 3300.

HMRC will let you know if there are any personal tax matters outstanding, including income tax on earnings from self-employed work. However, you may need to contact separate HMRC departments for other business-related taxes. Examples of business taxes include Value Added Tax (VAT) if the person was VAT registered, and Pay As You Earn (PAYE) and employer National Insurance Contributions if the person was an employer. You can find contact details for different HMRC departments on the GOV.UK website.

If you are not sure which business-related taxes might need to be dealt with, check if there are any tax papers that may help you. If the deceased was using a professional to help with their taxes, like an accountant or bookkeeper, they may also be able to help you.

Life insurance

You should check whether the deceased has any life insurance policies that should pay out. Any money paid out would go to either:

• the policy holder or their estate if they have died;
• a surviving joint policy holder if the policy is in joint names and one policy holder has died;
• a beneficiary that was nominated by the policy holder; or
• a trust.

Speak to the life insurance company to find out.

Other organisations that may be useful

Death Notification Service

The Death Notification Service has been created to tell a number of banks, building societies and financial institutions at the same time about a person's death. The aim is to make the process secure, quick and straightforward.

If your case is particularly complicated or time-sensitive (for example, if money or property needs to be released from the estate urgently), you should discuss it with the deceased person’s bank or building society before using this service. There’s information in the Frequently Asked Questions about what you can do in this situation.

You do not need to create an account to use this service, but if you do:

• you will receive confirmation that the information has been received by the financial institutions; and
• if you find more accounts held by the person that has died, you can add them to your information later.

If you have any difficulties creating an account, contact the Death Notification Service Helpline on 0333 207 6574 from the UK or +44 121 4150965 from overseas (opening hours 08:30-17:30, Mon-Fri - excluding bank holidays).

My Lost Account

My Lost Account is a free service that can help find bank accounts that have not been used for three years or more. This may be useful if you are handling the deceased person's finances as you can check if they had any accounts that you are unaware of.

The Pension Tracing Service

The Pension Tracing Service is a free service that can help find unclaimed pension pots. This may be useful if you are handling the deceased person's finances as you can check if they had any pensions you were unaware of.

What happens to debts when someone dies?

If the debts are in the deceased person’s sole name and they have no assets, the debts will not be owed by anybody else when they die.

If the debts are joint or someone has acted as a guarantor, then the surviving person or guarantor will be liable for these debts. If you have been left with debts which are unaffordable please contact us for advice.

If the deceased person has assets in their estate, joint or sole, the debts become a liability on the estate. The executor of the estate is responsible for paying outstanding debts from the estate. Find out more in our Dealing with the estate section.

Dealing with debts if there is no estate

The estate is made up of assets that have been left behind. Assets can include:

• property and land;
• money in bank accounts; and
• personal possessions.

If there is no estate, you or a third party cannot be held liable for debts if you did not take them out jointly or did not act as a guarantor.

Contact any organisation that is owed money and inform them of the death. You are able to inform most organisations online, they will want a copy of the death certificate and details. Inform them that there is no money in the estate and ask them to confirm that the account is closed. You can use our sample letter Write off after death to help you.

More detail on dealing with different types of debt can be found later in this fact sheet.

If there is no money in the estate to help you arrange a funeral please see our Help with Funeral costs and benefits section.

Dealing with the estate

If the person who has died left a will, it should say who the executor of the will is. To distribute the estate, the executor will need to apply for probate. In England and Wales this is called ‘Grant of probate'.

The cost to apply for probate is £300 if the estate is valued at over £5,000. The fee is usually paid for out of the estate, if there is enough money to do so. There is no fee if the estate is valued at £5,000 or less.

You may be able to get help with the fee if you have a low income. You can find out through GOV.UK.

You can apply for probate through GOV.UK.

Applying for probate may not be necessary in all circumstances, for example:

• there are no assets;
• if the estate is small, usually less than £5,000; or
• all the assets in the estate were held as joint tenants and so pass by means of survivorship (see the Joint property section below).

If the estate is complicated you may wish to use a probate specialist, though these can be expensive.

If the person who has died has not left a valid will, people close to them may be able to apply to court to get permission to deal with the estate. This person will be called an administrator. The law sets out who can apply to be an administrator in order of priority, including any surviving husband or wife, children, father, or mother and so on. A full list of who can apply can be found on GOV.UK.

Whoever deals with the estate is known as the personal representative.

If you are the personal representative and do not wish to continue to act as one, you may be able to step down. This will depend on the exact situation, so if you are considering this contact the probate helpline first.

Personal representative duties

The personal representative is able to pay for funeral expenses and administration costs out of the estate before paying any of the deceased person’s creditors. The full list of personal representative responsibilities are as follows.

• List all assets and liabilities of the deceased.
• Deal with tax affairs, including working out the amount of Inheritance Tax (if any).
• Apply for grant of probate/letters of administration.
• Collect in all assets.
• Pay funeral expenses and administration expenses.
• Pay debts.
• Pay beneficiaries.
• Prepare estate accounts. GOV.UK has more on this.

Inheritance Tax

Inheritance Tax will need to be paid before probate can be granted. Inheritance Tax is not payable on estates worth less than £325,000. This limit can increase depending on the exact situation. Property which is left to a spouse is exempt from Inheritance Tax. Use the Which calculator to work out if any Inheritance Tax needs to be paid.

Liabilities

As well as assets, the deceased’s liabilities will from part of their estate. Any liabilities could reduce the value of the estate for Inheritance Tax purposes and have to be dealt with by the personal representative.

Liabilities could include, amongst other things:

• a mortgage;
• rent arrears;
• credit cards; and
• utility bills.

We cover how these liabilities should be dealt with later on in this fact sheet.

Paying creditors and beneficiaries

The personal representative needs to pay creditors of the deceased before payments are made to any beneficiaries, if this isn’t done they could become liable for the debt.

Asking creditors to submit claims through an advert in The Gazette and local newspaper will help protect the personal representative from liability, but at least two months should be given for creditors to come forward. You can find out more through The Gazette.

Once creditors have been paid, the personal representative can pay any remaining estate to the beneficiaries set out in the will.

If there is no will then the distribution of the estate will be based on the rules of ‘intestacy’. You can find out more about the rules of intestacy through Citizens Advice.

If you are living with someone but not married or in a civil partnership, this may mean you won’t receive anything from an estate.

GOV.UK has a tool which can help you find out who inherits if someone dies without a will.

If a creditor or beneficiary suffers a loss as a result of the personal representative not following the correct process, they may make a claim against the personal representative. As this can be a complicated area you should get legal advice if needed. You can find a solicitor through the Law Society.

What happens to a person’s business when they die?

If the person who has died had a business, their trading status will affect what happens with the business and any debts or assets the business had. The deceased person will probably have been a sole trader, a partner in a business partnership or a director of a limited company as these are the most common types of status.

Sole trader

The deceased person may have been a sole trader if they ran the business as an individual and worked for themselves. For more information, see our Sole traders fact sheet.

If the person who has died was a sole trader, any assets of the business will be assets in the estate and any business debts will be a liability on the estate. If the deceased had employees and they had been employed for at least two years, they may be able to make a claim against the estate for statutory redundancy.

A sole trader business usually comes to an end if the sole trader dies. However, if there is a will, it may give the executor the power to continue to run the business. An executor that wishes to continue a business is likely to need specialist legal advice to understand any risks involved with continuing the business. For example, if there are employees that are kept on, the executor of the will would probably become an employer that is bound by employment law. You can find a solicitor through the Law Society.

Partner in a business partnership

If the person who has died managed the business with at least one other person, they may have been a partner in a business partnership. For more information, see our Business partnerships fact sheet.

Partnerships can be set up with or without a partnership agreement. If there is a partnership agreement, check it to see if it says what happens to the partnership if a partner dies and what happens to the deceased partner’s share of the business.

If there is no partnership agreement with provisions relating to the death of a partner, the partnership automatically dissolves. This means that the partnership cannot conduct new business. The remaining partners will only be able to run the business to complete unfinished contracts, sell assets, collect money that is owed and to pay partnership debts. If there is any money left after partnership debts have been paid, the deceased partner’s share of this will form part of the estate.

It there are unpaid partnership debts that were incurred before the death of the deceased person, the estate will be liable for these debts. This is because the estate is ‘jointly liable’ for the partnership debts. To find out more about liability for debts owed by a partnership, see our Business partnerships fact sheet.

Dealing with business partnerships can be complicated. The personal representative will usually need specialist legal advice. For example, advice may be needed on valuing the business, how any assets should be sold and how any profits should be distributed. You can find a solicitor through the Law Society.

Director of a limited company

The person who has died may have been the director of a limited company if the business had ‘limited’ or ‘ltd’ in its name. Limited companies also have a company number and are registered with Companies House. For more information, see our Limited companies fact sheet.

A limited company is a separate legal entity from its directors. Directors are not usually liable for company debts if they have not given a personal guarantee.

There are various factors that can affect what happens with a limited company when a director dies. These include whether there was more than one director and whether the person who died was a shareholder. If the person who has died was a limited company director, the personal representative is likely to need specialist legal advice. You can find a solicitor through the Law Society.

Insolvent estates

An estate is called 'insolvent' if the total needed to pay the funeral costs, administration costs and debts is greater than the total value of the assets.

Insolvent estates can be complicated and difficult to deal with. You may need specialist legal advice. You can find a solicitor through the Law Society.

If the personal administrator decides to pay creditors from an insolvent estate, they must do so in the following order.

• Secured creditors.
• Reasonable funeral, administration and testamentary expenses. Testamentary expenses can include things like probate fees and solicitor fees.
• Preferred and preferential debts. For example employee wages, if the deceased person employed someone.
• Unsecured creditors.
• Interest due on unsecured loans.
• Deferred debt, such as an informal loan between family members.

If there are insufficient funds to pay all the unsecured lenders in full, they should be paid on a pro-rota basis. This means that the debts will be paid proportionally, with the largest lender receiving the largest share and the smallest lender the smallest share. Failure to follow this order may mean they incur personal liability for some of the debts not paid.

Property

If the deceased person has left a property which is jointly owned, it will be owned in one of two ways.

Tenants in common

Each owner will have a defined share of the property. The shares will usually be set out in the deeds. When one owner dies, their share does not automatically pass to the surviving owner. The deceased person’s share will form part of the estate and will be available to pay creditors and those named in any will. It may be possible for the co-owner to offer to pay the debts to avoid the property being sold. If you need to negotiate, contact us for advice.

Joint tenant

Each owner owns all of the property. When one owner dies, their share does automatically pass to the other owner. It does not form part of the estate available to creditors. Therefore, the property is not taken into account when working out whether the estate is insolvent.

If you are unsure how the property is owned then you should contact land registry to find property ownership information, there is a cost of £3.

Property in insolvent estates

If the estate is insolvent, the creditor could apply to court to recover the deceased person's assets, this would include the deceased share of the property. This is called an insolvency administration order, the creditor has five years to apply from the date of death.

For tenants in common, insolvency administration orders are very unlikely as the deceased persons equity will already form part of the estate.

Creditors do not apply for insolvency administration orders very often but it may be more likely for joint tenants as the deceased persons equity passes to the surviving owner. If a creditor threatens to do this, any surviving owner may need to try to negotiate with the creditor to prevent them making this application. The surviving owner could offer to pay a debt by instalments or offer a lump sum. If you need to negotiate, contact us for advice.

What happens to rented property after death?

Tell the council or housing association about the death, the Tell us once service can help you with this.

If the property is a council or housing association tenancy and there is a joint tenant, the joint tenant should automatically take over a tenancy. If there are any arrears the joint tenant will be liable to pay them. Rent arrears should be treated as a priority debt and an arrangement should be made to reduce the arrears at an affordable amount.

If the tenancy was a sole tenancy in the deceased person’s name then any arrears should be paid by the estate. If there isn’t money in the estate to pay the arrears, they don’t need to be paid.

In some circumstances a husband or wife, partner or a member of the tenant’s family may be able to ‘succeed’ or inherit the tenancy, if they have been living there when the tenant died.

If you are liable for rent arrears and are unable to afford repayments contact us for advice.

If you live in England, see our Rent arrears - England fact sheet for more information.

If you live in Wales, see either our Rent arrears for standard occupation contracts - Wales fact sheet or Rent arrears for secure occupation contracts - Wales fact sheet for more information.

Ending tenancy England

In England, a tenancy will not end when a person dies and no one inherits it, the landlord or the person handling the affairs of the tenant that died can end the tenancy.

If someone has been living in the property and no one inherits the property, they have a right to stay in the property until the tenancy is ended by the landlord or the person handling affairs of the tenant that died.

For more detailed information about dealing with a tenancy after death, contact Shelter on 0808 800 4444.

Ending tenancy Wales

In Wales, if a sole contract-holder dies, the occupation contract will usually end one month after the death of the contract-holder. The personal representative can end the occupation earlier by giving notice to the landlord.

There are some exceptions to this, for example if the contact can be succeeded or for some fixed-term standard contracts that include a provision to transfer the contract on death to a third party.

For more detailed information about dealing with a tenancy after death, contact Shelter Cymru on 08000 495 495.

What happens to energy bills after death?

Tell the energy company about the death as soon as you can. Most energy companies will have an online form that you can complete. The form will ask for contact details, details of the deceased, whether gas and electricity will continue to be used at the property and details of the executor of the estate.

If there is jointly owned or jointly rented property, the person still living there will be liable for the ongoing bill.

Anyone who was already named on the bill will be liable for any gas or electricity arrears. Gas and electric arrears should be treated as a priority because you can get disconnected.

See our Gas and electric arrears fact sheet for more information. If you now have energy arrears which you cannot afford to repay, contact us for advice.

If the energy bill was in the deceased person’s sole name, any arrears should be paid by the estate. If there isn’t enough money to do this, the money will no longer be owed.

If your name is not on the bill and the energy company tries to argue that you have benefited from the energy supply and so should pay the bill, contact us for advice.

What happens to water bills after death?

Tell the water company about the death as soon as you can. Most water companies will have an online form that you can complete. The form will ask for contact details, details of the deceased, whether water will continue to be used at the property and details of the executor.

Any joint occupier will also be responsible for the ongoing bill, the name(s) on the bill should be changed by the water company.

If there are any arrears, the joint occupier will also be responsible for these. Water arrears are a non-priority debt because the supply can’t be disconnected if there is still someone living in the property. See our Water arrears fact sheet for more information.

Any liable person would need to pay the on-going water bill and offer an affordable amount to any arrears. If you have been left with a water bill that you will struggle to pay, please contact us for advice.

If the water bill was in the deceased person’s sole name, any arrears should be paid by the estate. If there isn’t enough money to do this, the money will no longer be owed.

What happens to council tax after death?

Let the council know about the death as soon as you can.

If a rental property had been solely occupied by the person that has died, liability usually falls to the owner or leaseholder.

If the property was solely owned by the person that has died, it will be exempt from council tax payment as long as it remains unoccupied and until probate is granted. Once probate is granted a further six months' exemption may be possible as long as the property remains unoccupied.

If the person who has died lived on their own, any arrears will be paid out of the estate. If there isn’t enough money to do this, the money will no longer be owed.

A partner of the person who dies will be responsible for the ongoing bill, but can claim a 25% discount if they are the only adult in the house.

They will also be liable for any council tax arrears if they were living in the house, even if their name is not on the bill. If the person was not named on the bill, the council will have to send a new bill in their name before they can recover any outstanding council tax. Council tax arrears are a priority debt, the council will want the ongoing council tax paid plus an extra amount to clear the arrears. See our Council tax arrears fact sheet for more information.

If you have council tax arrears that you will struggle to repay, please call us for advice.

What happens to rented commercial property after death?

If the person who died was named as a tenant on a commercial property lease, you should let the landlord know about their death.

Where the deceased person was the sole tenant, check the lease agreement to see if it says what happens after the death of a tenant. If the agreement does not say anything about what happens after death, the lease will not end and will instead form part of the estate. If the personal representative does not want the lease to end, the ongoing rent will have to be paid. If there are any rent arrears, the landlord may be able to take action to end the lease and repossess the premises. For more information, see our Commercial property leases fact sheet.

If the estate is liable to pay the rent for the commercial property, the personal representative may wish to discuss options for ending the estate’s liability with the landlord. You should check the lease to see if there are any clauses that can be used to end the lease early. Other options could include the landlord agreeing to end the lease or allowing the lease to be passed on to somebody else. It may be possible to sell the lease, with the money from the sale being paid into the estate. Consider getting advice from a solicitor to make sure your rights are protected when the lease ends early and to minimise the debt that the estate is liable for. You can find a solicitor through the Law Society.

If the person who has died was a joint tenant on the lease, it is likely that legal advice will be needed to understand what liabilities and interest will form part of the estate.

Business rates

Tenants on commercial property leases usually need to pay business rates to the council. You should contact the council to let them know that the tenant has died.

If the deceased was the only person named as a tenant in the commercial property lease and the commercial property is only in the possession of a personal representative, the property is exempt from business rates.

What happens to benefit overpayments after death?

If someone who dies was claiming benefits, make sure that the Department for Work and Pensions (DWP) and the council know that they have passed away. This can be done through the ‘Tell Us Once’ service. See the earlier section Steps to take after someone dies.

Sometimes the DWP may say that they have paid the person who died too much benefit. This means there will be a debt called a benefit overpayment.

It is important to understand why the DWP or council say that a benefit overpayment has happened. Contact us for advice about whether their decision is correct.

If only the deceased person is liable, it can be recovered from the estate. If there isn’t enough money to do this, the money will no longer be owed.

What happens to hire purchase agreements after death?

Hire purchase agreements are usually used to buy cars, but some shops sell household goods on hire purchase too. The goods do not belong to you until you make the final payment.

Check the agreement to see if it is a hire purchase agreement before returning the goods to the creditor and contact us for advice.

Check to see if there is an insurance policy that pays off the agreement if the person hiring the goods dies. If there is an insurance policy, the credit agreement may be paid off and the goods would then become part of the estate.

Dealing with a hire purchase agreement after someone dies can be complicated. Contact us for advice about finding the right type of help.

What happens to credit debts after death?

Only a person who has signed the credit agreement can be held liable for credit debts such as credit cards, overdrafts, unsecured loans and catalogues. Any money owed by the person who died can be recovered from their estate. If there is not enough money in the estate to clear the debts in full, see our Insolvent estate section earlier in the fact sheet.

Let the lenders know about the death. You can use the Death Notification Service to notify several banks and building societies at the same time. Most major banks are part of the Death Notification Service. For more information on the Death Notification Service, see our Steps to take when somebody dies section earlier in the fact sheet.

Many lenders also have an online form you can use and bereavement specialists who can help. The lender will also ask for a copy of the death certificate.

If the debts are in joint names or had a guarantor, the surviving person or guarantor will become solely liable for them. If you have debt which you are unable to repay, please contact us for advice.

Help with funeral costs and benefits

Funeral expenses

If the funeral has already been paid for, or money has been left in the estate to cover it, the executor of the estate will pay the funeral bill.

If there isn’t money to do this then a friend or relative will usually pay for the funeral and claim the funeral costs back from the estate, if there is enough money in it. If the person who has died has other debts, reasonable funeral costs can be paid first.

Check with the executor of the estate before paying for a funeral to see if there is enough money in this estate to claim back. The amount of money in the estate may affect the amount you decide to spend on the funeral.

If you are arranging a funeral and you are on a low income, you may be able to get help through a Funeral Expenses Payment. How much you get depends on your circumstances. For more information and to claim go to GOV.UK.

If arranging a funeral is unaffordable, a Public Health Funeral may be arranged. The local authority will usually decide the time and place. Speak to your local council about this.

Benefits

Depending on your situation you may be able to claim extra income or reduce your outgoings.

• If your spouse or civil partner dies you may be able to claim bereavement support payment. The amount you get will depend on your situation; it’s paid for 18 months following the death.
• If you have had a drop in income, you might be able to claim Universal Credit to help.
• If you are the only adult in the property, you may be able to claim a 25% discount on your council tax bill.

The Tell Us Once service can check whether you are able to get help with funeral costs and what benefits you may be able to claim. You can also do a full benefits review through Turn2us.

Useful contacts

Cruse Bereavement Care Phone: 0808 808 1677 www.cruse.org.uk/get-supprt/helpline

Death Notification Service Phone: 0333 2076574 www.deathnotificationservice.co.uk

GOV.UK For information about the steps to take after someone dies www.gov.uk/after-a-death

For information about dealing with someone’s affairs after they have died. www.gov.uk/wills-probate-inheritance

HMRC bereavement helpline For help with tax after someone dies Phone: 0300 200 3300

HMRC Deceased estate helpline For specialist advice about income and capital gains tax on someone’s estate. Phone: 0300 123 1072

Law Society Phone: 020 7320 5650 www.lawsociety.org.uk

MoneyHelper Phone: 0800 138 0555 www.moneyhelper.org.uk/en/family-and-care/death-and-bereavement

Shelter Phone 0808 800 4444 www.shelter.org.uk

Turn2us www.turn2us.org.uk

Other fact sheets which may help you

Business partnerships fact sheet

Commercial property leases fact sheet

Council tax arrears fact sheet

Gas and electric arrears fact sheet

Limited companies fact sheet

Rent arrears - England fact sheet

Rent arrears for secure occupation contracts - Wales fact sheet

Rent arrears for standard occupation contracts - Wales fact sheet

Sole traders fact sheet

Water arrears fact sheet