Household Debt – How can it affect my estate planning? Estate planning is something that you know that you need. However, what can you really do if your household debt is increasing? Laura Richardson investigates for you in her latest article . . .
According to UK Finance, the most widely used forms of debt in the UK are mortgages and spending accumulated on a credit card. In July this year, UK Finance released data stating that the total mortgage debt in the UK had risen by 7.6% since last year, and the total credit card debt in the UK had risen by 8.1% since last year. With average household debt on the rise, it is worthwhile to consider the effect that debt would have on your Estate value when you die. Furthermore, according to the National Audit Office, up to 8.3 million UK residents are unable to pay off their debts, such as rent, mortgages, credit card debt, or even household bills, which therefore may leave them with many such debts still outstanding when they die.
Under UK law, if you die with debts, these debts are usually recovered from your Estate. It is one of the tasks of an Executor or Administrator to ensure that your debts are paid before distributing any legacies to beneficiaries. The most common debts to be paid off in this way include a mortgage, as well as the balance of credit cards and household bills.
If there is not enough value in your Estate, then providing that the debts were held in your name and leave no surviving debtor, your debts are wiped clean. However, whilst the financial burden of your debt is not passed on to any family members, you would leave no inheritance for any family, friends, or charities to benefit from after you have died. It is important to consider that one cost that is passed on to your loved ones after you die is that of your funeral. Generally, the cost of your funeral would be taken from the value of your Estate. However, if there is no Estate value, then the cost of the funeral will need to be paid for by other means. The average cost of a funeral in the UK is reported to be in the region of £4,000 which could be an incredible financial burden to your loved ones at an already difficult time when they are grieving for your death.
If you have any concerns about the cost of your funeral, and how to prepare in advance to alleviate any financial burden from your loved ones, contact Andrew Douglas Wills and Legal Services today. Through our trusted partners we are able to offer a bespoke range of Prepaid Funeral Plans which means that all of the financial elements of your funeral, as well as much of the planning, is already taken care of by the time that you die. Call today to arrange a free initial consultation to discuss your financial needs and requirements. We welcome inquiries from across Essex and the UK.
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