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How to find details of the deceased person's debts and liabilities

Debts are anything the deceased person actually owed at the time they died. Other liabilities include amounts they are responsible for paying such as:

• household bills
• bills for goods and services they had received but not yet paid for
  

You'll need to look through all of the deceased person's paperwork for things like bills and statements. You might also need to contact organisations like energy suppliers or the local council to ask if they are owed any money.

Check for any services that the deceased person had used but not yet paid for. These debts could be for things like:

• builders
• decorators
• solicitors
• accountants
  

It's a good idea to make a list of all the debts and liabilities you find. You shouldn't include professional fees you pay for when dealing with the estate - things like solicitor's and estate agent's fees. You can't deduct these from the value of the estate but you may be able to claim them back from the estate later.

Types of debts and liabilities - working out the value

Mortgages and joint property

If the deceased person had a mortgage or secured loan on a property, you need to deduct the amount of the mortgage from the property's value.

If the mortgage or loan is for more than the property is worth you can deduct the excess amount from the rest of the estate.

Many couples own a property jointly and have a mortgage in both of their names. If this is the case, only deduct the deceased person's share of the mortgage.

If there's any payout from a mortgage protection policy you need to include this in the value of the estate.

• How to value joint property or assets for Inheritance Tax

Loans and credit card debts

If the deceased person had any loans, then you need to deduct the amount still owing from the value of their estate. You should do the same with any bank overdrafts and outstanding credit card balances.

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

Uncashed cheques

There may be outstanding cheques that the deceased person had written that haven't been cashed yet.

You can deduct the amount of these cheques from the value of the estate if they are for goods or services the person bought before they died.

If the deceased person had written a cheque as a gift, you can't deduct the amount of the cheque as a liability, but you shouldn't include the gift either. The gift is treated as though it hadn't happened.

Debts owed to close friends or family

You can only deduct debts from the value of the estate if they are legally enforceable.

A debt owed to a close friend or family member is usually accepted as being legally enforceable if one or more of the following applies:

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

There are different rules in Scotland, for example, you could use a statement from a third party to show that a loan is legally enforceable.

Gambling debts

Most gambling debts aren't legally enforceable, so you can't deduct them from the value of the estate.

You can only deduct debts due for bets placed through a 'totaliser' run by the Racecourse and Betting Control Board.

Guarantee debts

A 'guarantee' debt is a promise to pay someone else's debt if they can't pay it themselves. For example, the deceased person might have acted as a 'guarantor' for someone else to help them get a loan.

If the loan hadn't been repaid at the time the deceased died, you may be able to make a deduction from the value of the estate. Whether you can make a deduction, and how much you can deduct, depends on what resources the borrower has. If the borrower:

• has no financial resources, you can deduct the whole amount of the outstanding 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
  

If you do make a deduction, you'll have to value it as a cash gift.

• How to value gifts for Inheritance Tax

Funeral expenses

You can deduct funeral expenses from the value of the estate, plus a reasonable amount for mourning expenses. Expenses can include a reasonable amount to cover the cost of:

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

More useful links

• What happens to debts when someone dies?

Useful contacts

• Probate and Inheritance Tax Helpline