7. Debts and liabilities

When you value someone’s estate you deduct their debts from the total value.

This includes anything they owed when they died as well as ‘liabilities’, which are things they’re responsible for paying, like:

  • household bills
  • bills for goods and services they had received but not yet paid for (eg building work, decorators, solicitors, accountants)

You’ll need to look through their paperwork for things like bills and statements. You might also need to contact energy suppliers or the local council to find out if they owed money.

Mortgages and joint property

If the person had a mortgage or secured loan on a property, deduct this from the property’s value. If it’s more than the property is worth, deduct the excess amount from the rest of the estate.

If the person had a joint mortgage with someone else, just deduct their share of the mortgage.

If there’s any payout from a mortgage protection policy, you need to add this to the value of the estate.

Loans and credit card debts

You need to deduct the following from the estate:

  • loans
  • outstanding credit card balances
  • overdrafts

If there’s a payout from a payment protection plan, you need to add this to the value of the estate.

Uncashed cheques

If the person wrote cheques that haven’t been cashed yet you can deduct these from the value of the estate if they are for things the person bought before they died.

If they’d written the cheque as a gift, you can’t deduct the amount of the cheque, but you don’t add it to the estate either - you just ignore it.

Debts owed to close friends or family

You can only deduct these if they’re legally enforceable. This is when either:

  • the deceased person and the lender made a written or verbal agreement about repaying the loan
  • there’s evidence that the person was making repayments

Gambling debts

Deductions for gambling debts are allowed in England, Wales and Scotland if they can be legally enforced eg debts that arose from betting and gambling at licensed casinos and betting shops.

Debts relating to illegal gambling aren’t allowed. In Northern Ireland, gaming and wagering contracts aren’t legally enforceable and aren’t allowable for deductions.

Guarantee debts

These are promises to pay someone else’s debt if they can’t pay it themselves. If the loan hadn’t been repaid when the person died, you may be able to make a deduction from the estate. This depends on the borrower’s circumstances - if they:

  • have no financial resources, you can deduct the whole amount of the loan
  • can repay part of the loan, you can deduct the amount they can’t repay
  • can repay the whole loan, you can’t deduct anything

Funeral expenses

You can deduct these from the value of the estate, as well as expenses to cover things like:

  • flowers
  • refreshments for mourners
  • expenses paid by the executor or administrator when arranging the funeral
  • a headstone to mark the grave

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