It may not be the first thing on your mind when you lose a loved one, but keeping up with their utility bills and other ongoing or outstanding payments after death is vitally important. This brief guide will take some of the guesswork out of what debts and bills need to be paid when a person dies.

After a death, the executor of the estate is tasked with handling all of the affairs of the deceased. This includes paying bills during the process of administering the estate. In the grand scheme of things, settling utility bills can seem a relatively minor matter, but it is imperative that all of the various unpaid bills and expenses are dealt with correctly to avoid potential problems along the way. 

A deceased person's estate is liable for any outstanding payments, including any bills that were not paid before the person died, and bills that continue to come in during the probate process. These bills will need to be factored into the valuation of the estate when applying for probate, and it will be up to the executor or administrator of the will to pay debts when they begin to manage the estate. 

In this short guide, the experts at Percy Hughes & Roberts Solicitors explain which bills have to be paid after a death, whether executors need to continue making mortgage payments, and explain what happens if the estate cannot pay all of the money owed.  If you have any questions we have not answered, our expert wills and probate solicitors are happy to talk to you about any queries and provide the legal services you need. You can contact us by completing the enquiry form below or by calling 0151 666 9090. 

Does an Executor Have to Keep Making Mortgage Payments?

One of the more pressing bills that often scares executors is the mortgage. When a mortgage holder passes away, their monthly payments will still need to be paid until the estate has been settled and distributed. 

In fact, mortgage lenders can legally request the full sum of the mortgage to be repaid and force the sale of the deceased's property to reclaim any outstanding balance. In most cases, however, mortgage lenders are sympathetic and understanding, and will offer a grace period during the potentially lengthy legal process. 

Executors or administrators are required to pay off unpaid debts in priority order, and secured debts (such as mortgages) are at the top of the list. In most cases, executors sell property in order to pay these debts and distribute any remaining proceeds according to the provisions of the will. If your loved one had a life insurance policy, this may help you to make mortgage payments. 

Otherwise, the executor can undergo a mortgage assessment with the lender to confirm whether they are able to take over mortgage payments if they wish to keep the property. If the will states that beneficiaries should inherit the property from the estate, they will be responsible for mortgage repayments.

If the property was jointly owned, the ownership transfers automatically to any surviving tenants. This means all of the mortgage repayments for a jointly owned property will be the responsibility of any remaining owners, and in some cases, these joint tenants may also opt to sell the property to settle the outstanding debt. 

You will need to inform your loved one’s mortgage provider about their death as soon as possible and arrange the next steps. You cannot manage the estate or sell any property without a grant of probate - however, with a copy of the death certificate, you can make arrangements to continue paying bills and mortgages.  

What Other Bills Need to Be Paid After Death? 

After someone dies, there are various bills that may need to be paid that executors need to be aware of. These include:

Water, Electric and Gas

Executors will need to locate the relevant water, electric and gas meters in the property and take readings as soon as possible. They should then try to find the most recent utility bill, which will have contact details for the relevant provider.

From there, they should inform the utility companies of the death and provide them with the most up-to-date reading. Following this, the executor will be sent a final bill up to the meter reading they have given. Bear in mind that the person who died may have either been in credit or in debit with the utility company, and the valuation of the estate will be affected accordingly. 

TV, Phone and Internet

It is likely your loved one had a TV licence. Executors can visit the TV Licensing website to cancel this and prevent any further payments following a death. You will be required to provide the name of the deceased person, their address and their licence number, if you are able to find it. 

In relation to phone and internet bills, different companies will have policies in place for what happens when a bill payer dies. Many companies will ask you to either settle the contract (if it was expected to run for 12 months or longer), or pay any outstanding debts if the contract was a monthly rolling subscription. Below are useful links and resources for some popular mobile, landline and internet providers in the UK:

• BT

• EE 

• GiffGaff

• O2

• PlusNet

• Post Office

• Sky

• SSE

• TalkTalk

• Tesco

• Three

• Virgin

• Vodafone

Council Tax

Executors are responsible for making payments of Council Tax in cases where the person who died owed money. Payments should be taken out of the deceased’s estate and deducted from its value; if you cannot realise estate assets at this stage, you should be reimbursed. 

It is also the responsibility of the executor to inform the council about the death of an occupant of a property. The council will require the following information: 

• The name of the person who died

• The address where they lived

• Whether a single-person discount is now needed on the Council Tax bill

• The names and addresses of any executors to the will of the dead person

• The name and address of an appointed solicitor, if you wish the council to deal directly with them

Inheritance Tax

Executors will also be responsible for paying any Inheritance Tax (IHT) that is owed. This needs to be paid before probate can be issued although, where property is concerned, HM Revenue and Customs (HMRC) may accept staged payments until the property is sold. 

A deceased person’s estate is made up of their property, possessions, and money, minus any outstanding debts or money owed. Executors can find out this information with a copy of the death certificate. Once the value of the estate has been calculated, executors will need to determine whether there is any IHT to pay and, if so, how much is owed.

The tax is normally charged at 40 per cent on anything above the nil-rate band allowance. The standard nil-rate band allowance is £325,000 per individual. This means that the tax is only charged on the part of the estate that is above this threshold. For example:

Your estate is worth £400,000. The tax-free threshold is £325,000. The inheritance tax charged will be 40% of the difference, which is £75,000. In this scenario, the tax bill would equal £30,000.

IHT is a one-off tax that must be paid within 6 months of the death.

Funeral Costs

Executors should bear in mind that they are not liable to pay for funeral costs. The deceased person will usually have noted how they wish their funeral to be carried out in their will, and they should plan more than they can afford. As such, the money in the estate will normally cover all of the necessary funeral expenses. For an insolvent estate, assets must be used to pay creditors with secured debts first; once these priority debts are paid, any remaining funds will be used to cover funeral expenses.

The executor can pay for the funeral using their own money and then later recover costs from the estate if they wish to do so. Alternatively, they can ask for monies released from the deceased’s bank accounts – banks and building societies will release funds without a grant of probate to cover funeral costs, provided they are not owed an overall debt by the deceased. 

Other Debts 

A common misconception is that debt dies with the individual concerned. This is not true, and any other debts (such as credit cards and interest) will need to be paid from the value of the estate. 

There is a strict order in which these debts must be paid, and this is carried out before any beneficiaries receive gifts from the will. Once the executor has been given a grant of probate, they can then begin the process of paying off these debts. Wherever possible, they should communicate to creditors that the person has died, in order to prevent any consequences that may arise as a result of failing to pay.

What Happens if the Estate Does Not Have Enough Money to Pay Off Debts? 

If there are not enough assets or money to pay off bills and debt after a death, the executor will be responsible for settling as many of the debts as possible. They are also able to apply for an Insolvency Administration Order (IAO). This effectively declares the deceased person bankrupt, though this can only be used if the individual had not already been declared bankrupt before they died.

An IAO allows the executor to begin administering the estate through a set framework where any assets owned by the deceased person are used to pay any outstanding debts in a particular order. This hierarchy is as follows

1. Secured Debts - Creditors whose debts are secured over a particular asset. E.g. a mortgage

2. Funeral Expenses - Money in the estate can then be used to pay for basic funeral expenses

3. Testamentary Expenses - Fees or payments incurred by any representative when administering the deceased’s estate. Examples might be solicitors’ or insolvency practitioners’ fees

4. Preferential Creditors - Individuals or organisations that have priority in being paid money. An example of this might be employees, if the deceased employed people

5. Unsecured Debts - Creditors that have lent money without obtaining any specified assets as collateral

6. Interest due on unsecured loans

7. Deferred Debts – e.g. loans between family members

Visit our useful guide on how to deal with the estate of a bankrupt person for more information.