Death - loan liability

[Col2]

My mum’s husband (she remarried) dies a few weeks ago. He had bladder cancer and had been unwell most of the year.

My mum has just found out that he took out a £14k personal unsecured loan with Bank of Scotland in April 2020. He was 82 years old and it was over 4 year period. At the time he would have either been in hospital or as a minimum known he was seriously unwell.

My mum had no idea he had done this and the loan was in his name and at his bank. They had separate bank accounts from day one.

My mum has contacted the bank and shared death certificate. The bank have spoken to her and told her (this was first time she knew) he had a considerable loan and have indicated they will offset full loan against all his remaining savings.

Two questions. I am not convinced the bank have the right to offset against another account. And where does my mum stand of the fact that a mainstream bank have given a loan to an unwell 82 year old?

Any thoughts?

[Jones28]

I would have thought he would have had to tell them about his savings so they’d act as a form of security? I don’t think banks can loan out that kind of some without some kind of evidence it can be repaid.

Why was he borrowing so much if he had the savings?

[Since90+2]

My mum’s husband (she remarried) dies a few weeks ago. He had bladder cancer and had been unwell most of the year.

My mum has just found out that he took out a £14k personal unsecured loan with Bank of Scotland in April 2020. He was 82 years old and it was over 4 year period. At the time he would have either been in hospital or as a minimum known he was seriously unwell.

My mum had no idea he had done this and the loan was in his name and at his bank. They had separate bank accounts from day one.

My mum has contacted the bank and shared death certificate. The bank have spoken to her and told her (this was first time she knew) he had a considerable loan and have indicated they will offset full loan against all his remaining savings.

Two questions. I am not convinced the bank have the right to offset against another account. And where does my mum stand of the fact that a mainstream bank have given a loan to an unwell 82 year old?

Any thoughts?

I would imagine that unless you can prove he wasn't of a sound mind at the time of the loan then the bank won't have done anything wrong legally (though morally could be argued otherwise).

[Jack]

When I read your post my first thought was did the husband know about the loan? It could have been taken out fraudulently. Why would he need a loan, that your mum didn't know about, when he's money in the bank?

Maybe I'm just watching too many of these scammer programmes on the telly!

[Skol]

What did he use the £14k for or is it still in his bank ?

[RyeSloan]

When I read your post my first thought was did the husband know about the loan? It could have been taken out fraudulently. Why would he need a loan, that your mum didn't know about, when he's money in the bank?

Maybe I'm just watching too many of these scammer programmes on the telly!


To be honest that’s what I thought as well! Will be well worth challenging the bank to provide the evidence that the loan was made correctly.

Next question was where has the £14k gone if he was sadly so incapacitated?

As for the due process there will be a legal requirement for his estate to settle outstanding loans so the bank are right in that his assets should be used to settle the loan.

Quite whether they have the right to do so themselves based on his other accounts with them is another matter, I would have thought this a matter of the probate process not for them to decide arbitrarily but then again I wouldn’t be surprised either way.

[Future17]

My mum’s husband (she remarried) dies a few weeks ago. He had bladder cancer and had been unwell most of the year.

My mum has just found out that he took out a £14k personal unsecured loan with Bank of Scotland in April 2020. He was 82 years old and it was over 4 year period. At the time he would have either been in hospital or as a minimum known he was seriously unwell.

My mum had no idea he had done this and the loan was in his name and at his bank. They had separate bank accounts from day one.

My mum has contacted the bank and shared death certificate. The bank have spoken to her and told her (this was first time she knew) he had a considerable loan and have indicated they will offset full loan against all his remaining savings.

Two questions. I am not convinced the bank have the right to offset against another account. And where does my mum stand of the fact that a mainstream bank have given a loan to an unwell 82 year old?

Any thoughts?

Hi mate, sorry to hear of your loss.

My first piece of advice (and she may already have done this) would be for your mum to speak directly to the bank's Bereavement Team, rather than the local branch or any other department. In my experience, Bereavement Teams aren't always perfect, but they are always better than regular staff in relation to this kind of thing, as they receive specialist training and therefore have specialist knowledge that regular staff simply don't possess.

To answer your questions:

1) "Offsetting":

Technically, the terms of the accounts (both the sole personal loan and the joint savings account) are likely to include clauses stating the bank is permitted to perform this type of offsetting. In reality, it's very shady practice, mainly because the bank has no right in executry law to "skip the queue" with regard to any other creditors who may have a claim on the estate.

The bottom line, however, is that the law usually supports the notion that half of the balance of a joint account belonged to the deceased and half to the surviving spouse. With that in mind, 50% of the balance of the joint account will form part of your mother's husband's estate and be used to pay debts and legacies to beneficiaries/legal rights claimants. The exception to this would be if your mum contributed the majority of the funds to the savings account and could prove she did so.

2) Capacity:

If your mother can prove her late husband lacked the mental capacity to enter into the loan contract at the relevant time, she can complain to the bank. If that doesn't work, she can escalate it to the Financial Ombudsman Service. In my experience, even the threat of a complaint to FoS is usually enough to have banks backtracking if they're not 100% certain they're on solid ground. However, proving a retrospective lack of capacity is almost impossible without contemporaneous medical evidence.

Is your mother the executor of the estate? If so, she'll be in a position to instruct the solicitors to dig a little deeper if required.

[Col2]

Thanks all. Appreciate the views.

I don’t know what happened to the money as she doesn’t have access to the bank statements so doesn’t know where it went.

I assumed it was him but that’s an interesting view. However we found a copy of the loan agreement after the bank told my mum (after digging around) so given it is in his home office I think it’s him who has applied.

The executor is my mum’s brother. We can’t work out what he did with the cash but will hopefully find out soon.

[MyJo]

Yeah the bank are allowed to do that where there is money held in some accounts but outstanding debts on others. The only exception is where the money in the account is needed for things like funeral expenses and you can ask the bank to pay that from the money in the accounts before they settle everything else.

They cant make anyone else like the next of kin or executors repay unsecured debts, they will request that outstanding balances are repaid from the estate but if it doesn't happen then they can't do anything about it and would have to write off the debt.

First thing I would check is if the money he had in the bank account was actually the funds from the loan anyway as it seems strange someone in his situation would take a loan when they had more than that sitting in an account anyway. Might be that he took the loan and the money has sat there without being used for whatever he intended to do with it. In that case it would be difficult to argue with the bank taking the funds back.

If that hasn't happened and the loan money has gone elsewhere then I would dig into it a bit deeper with the bank as it could be either fraudulent or part of a scam that you weren't aware of.

[MyJo]

Thanks all. Appreciate the views.

I don’t know what happened to the money as she doesn’t have access to the bank statements so doesn’t know where it went.

I assumed it was him but that’s an interesting view. However we found a copy of the loan agreement after the bank told my mum (after digging around) so given it is in his home office I think it’s him who has applied.

The executor is my mum’s brother. We can’t work out what he did with the cash but will hopefully find out soon.

Get the executor on the phone to the bereavement team and ask for copy statements to be provided back to April so you can see what happened to the loan funds, they absolutely will be able to provide that for you at BOS

[gbhibby]

Get the executor to ascertain what the loan was for as the bank have to go through compliance processes before giving out loans. If the loan was for a car there may have been other products available at lower interest rates. The bank will offset the the loan against savings account but the executor will have to pull together all the estate info. As other posters have stated get the executor to contact the banks bereavement team. I am surprised that they granted the loan

[Hibernia&Alba]

I think you need someone like CWG on this. I would have thought that, if he has died before the personal loan has been paid, then his debt dies with him? However, it all depends upon the small print of the loan; thus, if the T&C say the banks is entitled to take from savings in the event of death, that's that. It seems strange because, what if someone who doesn't save with them takes out a loan? Could they go after savings in another bank, to re-pay the loan? If not, how can it be right that someone who isn't an account holder doesn't face the same situation as those who do? I always thought an unsecured loan is exactly that: not dependent upon other sources of wealth. Then again I'm no expert on these things.

[MyJo]

I think you need someone like CWG on this. I would have thought that, if he has died before the personal loan has been paid, then his debt dies with him? However, it all depends upon the small print of the loan; thus, if the T&C say the banks is entitled to take from savings in the event of death, that's that. It seems strange because, what if someone who doesn't save with them takes out a loan? Could they go after savings in another bank, to re-pay the loan? If not, how can it be right that someone who isn't an account holder doesn't face the same situation as those who do? I always thought an unsecured loan is exactly that: not dependent upon other sources of wealth. Then again I'm no expert on these things.

The expectation is that the deceased’s debts will be cleared by the executor from the estate before any funds are distributed to beneficiaries but the banks have no legal recourse to pursue repayment of those unsecured debts if the executor chooses not to so where there is an opportunity to recover debts from funds held within the same bank then they are entitled to do so as part of the account settlement process.

If the person had no other accounts with the bank that held the unsecured debt then they will request the executor repay it from the estate but are ultimately relying on their goodwill to do that.

It’s not just after you pass away either, if you have a credit card or loan that falls into arrears due to non-payment and have money sitting in an account with the same bank that could clear those arrears then they can just take that money from the account to bring the debt repayment up to date

[Hibernia&Alba]

The expectation is that the deceased’s debts will be cleared by the executor from the estate before any funds are distributed to beneficiaries but the banks have no legal recourse to pursue repayment of those unsecured debts if the executor chooses not to so where there is an opportunity to recover debts from funds held within the same bank then they are entitled to do so as part of the account settlement process.

If the person had no other accounts with the bank that held the unsecured debt then they will request the executor repay it from the estate but are ultimately relying on their goodwill to do that.

It’s not just after you pass away either, if you have a credit card or loan that falls into arrears due to non-payment and have money sitting in an account with the same bank that could clear those arrears then they can just take that money from the account to bring the debt repayment up to date

Thanks for that :aok:

[HH81]

I work in a bank and something sounds wrong here.

Why would they offer such a high loan during the pandemic and also where are the funds gone is the key to this.

You need the bank statements ASAP.

[DH1875]

I work in a bank and something sounds wrong here.

Why would they offer such a high loan during the pandemic and also where are the funds gone is the key to this.

You need the bank statements ASAP.

I didn't want to say it but definitely something not right here. Who gives an 82 year old a £14k unsecured loan at the best of times never mind during a pandemic :confused: and then for that money to disappear and no one know where it is. Raises a few questions for sure;
How'd he get it. We were in lockdown in April so not like he walked into bank and had meeting with the bank.
Did bank not ask what the loan was for and how was he planning on paying it back as I'm guessing he wasn't working. Even if he was working, £14k to an 82 year old.

Sorry for OPs loss but look at this logically. If it were that easy why doesn't everyone over the age of 80 just take out unsecured loans of £14k and then give it to family members.

[Stick]

As others have indicated this whole story is very suspect. The bank have a duty off care, especially towards an ill 82 year old who requests a large loan over 4 years. Being unsecured would indicate they knew he had the funds to cover in case off default. They would have enquired as to the purpose off the loan, and should be able to provide details off this. Unless there’s a new BMW or Mercedes sitting in the driveway it should be possible for the bank to trace where the money went.
Full disclosure, I don’t trust banks or Insurance company’s as far as I could throw them.
If it were me I would contact Martin Lewis of Money Supermarket, as this is the type off story he would love to get his teeth into, as it involves a large financial institution.
Good luck

[hibby6270]

Sorry to hear of your loss.

Legally, a bank does have the right to offset a loan against any savings of the deceased.

However, a few other points to consider/answer:

If there’s a named executor, there is likely to be a will?
Are there other named beneficiaries in the will?

Is there Heritable property (e.g. - house) involved? Was it owned jointly with your mum or solely owned by the deceased?

If either the above are true, then a solicitor may need to be involved.

Here’s a link to Citizens Advice website on what can or could be required in winding up the estate. It can be quite an involved process depending on amounts involved.

https://www.citizensadvice.org.uk/scotland/family/death-and-wills/after-death-dealing-with-an-estate/

Finally, I worked in banking for over 40 years and I have to agree with other comments that there sounds like something’s not quite right about the granting of this loan given your mum’s husband circumstances in April 2020. That definitely needs more investigation to fully understand the reasons the loan was granted. What you’ve divulged so far does raise suspicion imho.

Good luck.

[Future17]

Sorry for OPs loss but look at this logically. If it were that easy why doesn't everyone over the age of 80 just take out unsecured loans of £14k and then give it to family members.

Because you still have to pay it back, whilst you're alive or after you're dead.

[lapsedhibee]

Because you still have to pay it back, whilst you're alive or after you're dead.

Is it not the case that once you're dead you only have to pay back what your estate can cover, ie if your estate is £10k and the debt is £14k, you get off with the £4k?

(Though if you gifted the £14k to family members shortly before dying that would be counted as part of your estate.
I think if you just used the loan to drink yourself to death on champagne you wouldn't have to pay it all back after you died.)

[Future17]

However, a few other points to consider/answer:

If there’s a named executor, there is likely to be a will?
Are there other named beneficiaries in the will?

Is there Heritable property (e.g. - house) involved? Was it owned jointly with your mum or solely owned by the deceased?

If either the above are true, then a solicitor may need to be involved

We're probably straying from the main topic, but the executor is not required to instruct a solicitor to administer the executry. If the value of the estate is over £36,000, most executors do instruct a solicitor, as that's the threshold above which the "small estate" process can't be used.

The number of beneficiaries or the existence of heritable property, in of itself, isn't relevant to whether a solicitor is required however.

[Future17]

Is it not the case that once you're dead you only have to pay back what your estate can cover, ie if your estate is £10k and the debt is £14k, you get off with the £4k?

(Though if you gifted the £14k to family members shortly before dying that would be counted as part of your estate.
I think if you just used the loan to drink yourself to death on champagne you wouldn't have to pay it all back after you died.)

If your estate was going to be £10k, you wouldn't get a £14k loan unless you had a large guaranteed regular income and if you have that, you're likely to have an estate worth more than £10k...unless you always use that income to try and drink yourself to death on champagne of course. :greengrin

In any event, there's not many people over the age of 80 in that position.

[DH1875]

Because you still have to pay it back, whilst you're alive or after you're dead.

That was kinda my point:wink:

[Future17]

That was kinda my point:wink:

Ah right, I think I understand, but I don't think the OP's main point was that it shouldn't be paid back, just that it shouldn't be paid back from a joint savings account.

[Hibs Class]

Ah right, I think I understand, but I don't think the OP's main point was that it shouldn't be paid back, just that it shouldn't be paid back from a joint savings account.

From the OP I didn’t get anything that stated the savings account was joint?

[Hibs Class]

I think you need someone like CWG on this. I would have thought that, if he has died before the personal loan has been paid, then his debt dies with him? However, it all depends upon the small print of the loan; thus, if the T&C say the banks is entitled to take from savings in the event of death, that's that. It seems strange because, what if someone who doesn't save with them takes out a loan? Could they go after savings in another bank, to re-pay the loan? If not, how can it be right that someone who isn't an account holder doesn't face the same situation as those who do? I always thought an unsecured loan is exactly that: not dependent upon other sources of wealth. Then again I'm no expert on these things.

It is a general principle that banks have the right to offset, just google it and read the results from e.g. financial ombudsman or money saving expert. That’s not to say that the bank’s rights cannot be challenged under certain circumstances, but the idea that death cancels obligations is just wrong.

[Moulin Yarns]

Have you established what the loan was for?

Could it be an equity release thing?

[Future17]

From the OP I didn’t get anything that stated the savings account was joint?

Good point. Not sure what the bank is doing telling his mum about the loan then. Very dodgy.

[MyJo]

Good point. Not sure what the bank is doing telling his mum about the loan then. Very dodgy.

She was the one who registered the death by providing the death certificate so she would have got the information about the accounts held etc at that point

[Future17]

She was the one who registered the death by providing the death certificate so she would have got the information about the accounts held etc at that point

That can't be right? You can register a death without even knowing a person (provided you know enough about them). Surely banks require more than a death certificate to give info out?

[MyJo]

That can't be right? You can register a death without even knowing a person (provided you know enough about them). Surely banks require more than a death certificate to give info out?

For Bank of Scotland (who these accounts are with) the person who registers the death needs to be a next of kin family member or executor, provide ID documents for themselves and have the death certificate.

Once that's been done they will get all the information about the accounts as that is needed in order for a Grant of Probate to be applied for.

If there is less than £50k being settled from the person's accounts then whoever it was that registered the death will receive that money after signing an indemnity to say they take responsibility for it and it's distribution etc

Only if there is more than £50k would they need to supply the Grant of Probate and then payment would be made to the legally appointed executors

Different banks have different procedures but that's how it works in Lloyds / HBOS.

Edit - Data protection also ends when someone passes away so there is no breach in providing personal or account data at that stage

[Future17]

For Bank of Scotland (who these accounts are with) the person who registers the death needs to be a next of kin family member or executor, provide ID documents for themselves and have the death certificate.

Once that's been done they will get all the information about the accounts as that is needed in order for a Grant of Probate to be applied for.

If there is less than £50k being settled from the person's accounts then whoever it was that registered the death will receive that money after signing an indemnity to say they take responsibility for it and it's distribution etc

Only if there is more than £50k would they need to supply the Grant of Probate and then payment would be made to the legally appointed executors

Different banks have different procedures but that's how it works in Lloyds / HBOS.

Edit - Data protection also ends when someone passes away so there is no breach in providing personal or account data at that stage

Just re-read your previous post and now get that you meant register the death with the bank (as opposed to the state). Apologies.

We don't have probate in Scotland (we have confirmation where required) but it's a similar process. I'm still really surprised by that though - whilst GDPR concerns end with death, any duty of confidentiality doesn't, so it seems strange to me. On the flip side, I appreciate it makes things a lot easier for the surviving family in 99.9% of cases though.

[overdrive]

Just re-read your previous post and now get that you meant register the death with the bank (as opposed to the state). Apologies.

We don't have probate in Scotland (we have confirmation where required) but it's a similar process. I'm still really surprised by that though - whilst GDPR concerns end with death, any duty of confidentiality doesn't, so it seems strange to me. On the flip side, I appreciate it makes things a lot easier for the surviving family in 99.9% of cases though.

So how would an executor gain access to the accounts if confidentiality remained?

When I was the executor for a family friend’s estate, I had major issues closing her BT account as they kept on insisting that due to confidentiality they could only speak to the account holder. They simply wouldn’t accept from me (and the solicitor initially) that the account holder being dead meant that this was not possible!

Bank of Scotland passed over the relevant files once I showed them the death certificate and proof of my ID and the relevant paperwork related to me being the executor.

Santander would only deal with a solicitor but the end result was the information about the accounts coming back to me as the executor.

Edit: as soon as I hit post there, I remembered that the deceased’s brother was the executor rather than the OP’s mother, so I get your point.

[Future17]

So how would an executor gain access to the accounts if confidentiality remained?

When I was the executor for a family friend’s estate, I had major issues closing her BT account as they kept on insisting that due to confidentiality they could only speak to the account holder. They simply wouldn’t accept from me (and the solicitor initially) that the account holder being dead meant that this was not possible!

Bank of Scotland passed over the relevant files once I showed them the death certificate and proof of my ID and the relevant paperwork related to me being the executor.

Santander would only deal with a solicitor but the end result was the information about the accounts coming back to me as the executor.

Edit: as soon as I hit post there, I remembered that the deceased’s brother was the executor rather than the OP’s mother, so I get your point.

That's something else from BT! :rolleyes:

Yeah, the executor I totally understand as, provided the deceased has made a Will, they have chosen that person to have access to the relevant information. Giving the information to anyone else seems odd to me.