When someone who has a mortgage dies, it is important to notify the lender as soon as possible. If the property has been left to you in a Will, you should ask them about the options for taking on some or all of the mortgage if it cannot be repaid.
After a death, notifications need to be sent to all of the organisations where the deceased held an account. This includes any mortgage lender.
What happens next
The monthly payments will still need to be made while the estate is administered. If the mortgage was in the sole name of the deceased, then the mortgage company has the right to ask for the repayment of the amount owed in full.
If the property is passed to someone else and they are able to meet the mortgage payments, then the mortgage company may consent to transferring the mortgage debt to that person.
It is important to speak to the lender early on after the death, so that they can set out the options.
If the property is sold, then the mortgage will be repaid from the proceeds of sale.
Where there is a joint mortgage
When a property is held with someone else as joint tenants, then the property and the mortgage will automatically pass to that other person on the death of the other owner.
This means that they will be responsible for making the mortgage payments. If this is not possible, then the property may have to be sold to repay the debt.
If the property is held as tenants in common, then the situation can be more complicated as the deceased’s share of the property becomes part of their estate and will pass in accordance with the terms of their Will or the rules of intestacy.
If the remaining owner does not inherit the rest of the property, there may be an option for them to purchase it.
To prevent a tenant in common being forced to leave the property, it is possible for property owners to leave each other a life interest in their share of the home. This means that the surviving spouse or partner would be able to continue to live in the property after death of the other. Following the survivor’s death, the share of the property owned by the first to die would still pass in accordance with their Will.
It is particularly important to think about what you would like to happen to your property after your death if you have a mortgage over it. You need to consider whether others would be able to afford to take on the debt and, if not, how you can secure their future, for example, by leaving them a bequest or taking out a life insurance policy.
If you would like to talk to one of our Wills or property experts, ring us on 01243 216900 or email us at firstname.lastname@example.org.
Over time, changes in circumstances can mean that a Will becomes out of date and doesn’t accurately reflect your wishes. We look at how to ensure your Will can cope with changes.
It is a good idea to make a Will, even if you are young. It helps keep your financial affairs organised and if anything should happen to you, it will be of comfort to your loved ones to know your wishes. You should review your Will from time to time, and update it if necessary. But careful drafting will help it stand the test of time.
Executors and guardians
When you write a Will you need to appoint one or more executors to deal with the administration of your estate. This can be a time-consuming and complicated job, so you should ensure that whoever you choose is able and willing to take on the role.
Over time, their circumstances may change however, and if you have appointed more than one executor, along with substitutes, then there is a good chance that even if someone cannot act, one of your other choices will be able to take over.
Similarly, if you are appointing guardians for children who are under 18, then you should consider alternatives in case your first choice cannot take on the role.
If you leave bequests to children by name, then babies who are born after your Will is written may be excluded.
It is possible to draft a Will that takes into account future births, and includes them alongside those who were already living at the time the Will was made.
Although it is possible to take a number of steps to future-proof your Will, you should note that upon marriage or civil partnership, any Will you have made becomes invalid, unless it was specifically made in contemplation of that marriage or civil partnership.
Change in the value of your estate
Over time, your estate may alter in value considerably, for example if you come into money or if a substantial amount of money is used in care home fees.
This can affect the proportions of any gifts you leave under your Will. Specified sums are paid out first, then the remainder is split between your choice of named beneficiaries. If the amount in your estate decreases, this could leave those inheriting the residue with less than you envisaged them having.
Even if you are confident that you have future-proofed your Will as far as possible, it is still advisable to review it regularly, and re-draft it if necessary.
If you would like to talk to one of our Wills experts, ring us on 01243 216900 or email us at email@example.com.
Pensions are notoriously complex and different rules can apply to different pensions held by different companies.
After someone’s death, the benefit of their pension may be payable to the person they nominated when the scheme was set up.
Workplace and private pensions
Sometimes a workplace or private pension scheme will provide a lump sum and/or income to your beneficiaries after you die. This will be paid to the nominated person, but it is possible for a dependant to make a claim on the funds if they have been excluded.
When you reach retirement age, you may choose to remove a lump sum of 25 percent of the value of the fund from your pension. If this is still in your estate at the time of your death, then Inheritance Tax may be payable on it, depending on the size of your estate.
You can gift this during your lifetime if you choose, but if you were to die within seven years of making a cash gift, then all or part of its value will be taken into account when Inheritance Tax is calculated.
Leaving pension funds to a beneficiary
Where a joint annuity is held, payments, usually to a spouse or partner, can continue after the death of the pension holder.
If the pension guaranteed annuity payments for a certain period of time, then these will continue to be made to a beneficiary for that period of time.
The pension may entitle beneficiaries to receive a lump sum payment. If the deceased left children under the age of 18 or a dependent partner or relative, then the pension trustees may make the decision to award a payment to them.
Payment of Inheritance Tax
Pension funds are paid at the discretion of the pension trustees and do not usually form part of the deceased’s estate, in which case Inheritance Tax is not payable on their value.
However if the pension trustees are not able to make a decision as to who the pension funds should be paid to, they may make the payment into the estate, in which case the money would be included in the Inheritance Tax calculation.
Following someone’s death, you should speak to their pension provider to find out how and to whom any payments will be made.
Because pensions are such a complex area, it is advisable to take independent advice when writing a Will, dealing with pension funds or administering an estate.
If you would like to discuss your Will or a probate matter with one of our expert team, ring us on 01243 216900 or email us at firstname.lastname@example.org.