When a joint borrower dies
What happens to the mortgage after a joint borrower dies, what the surviving client needs from their broker, the pension questions that follow, and when to offer an introduction.
What happens to the mortgage after a joint borrower dies, what the surviving client needs from their broker, the pension questions that follow, and when to offer an introduction.
When one of two joint borrowers dies, the debt remains. The surviving borrower is liable for the whole loan. What happens to the property depends on how it was owned.
Lenders have bereavement teams who handle these cases. They will want a copy of the death certificate and, where the deceased's share passes under a will, details of the executors.
The survivor may face a claim on life cover, a transfer of the mortgage into their sole name and a change in household income, while dealing with the funeral and the estate. Handle the mortgage at their pace.
Ask whether the survivor would like a family member involved, and record the answer.
A death can raise pension questions for the survivor, and some have time limits.
The deceased's fund can pass to the people they nominated, as a lump sum or as an inherited pension. Where the deceased died before 75, payments are generally free of income tax within the relevant allowance if paid within two years. Where they died at 75 or over, the beneficiary pays income tax on what they draw.
The scheme may pay a survivor's pension to a spouse, civil partner or dependant.
An employer scheme may pay a lump sum.
Nominations naming the deceased need updating.
The survivor may need to decide whether to take an inherited pension as a lump sum or keep it invested. That decision is pension advice.
From 6 April 2027 most unused pension funds count towards the estate for inheritance tax. A pension passing to a surviving spouse or civil partner is covered by the spouse exemption. The question returns on the survivor's own death, when the combined estate may be larger than it would have been under the old rules.
A survivor who inherits a partner's pension and owns the family home may now have an estate above the nil-rate bands. Estate planning for the survivor is part of what a planner can help with.
A life cover payout or an inherited pension may be enough to clear the mortgage. Whether to clear it, keep it or reduce it depends on the survivor's income, other savings, age and plans. Spending an inherited pension to clear a mortgage may also create an income tax bill.
Give the survivor the mortgage figures. Where the money to clear it would come from a pension or investments, offer an introduction before they decide.
If the deceased's share of the home passes to someone other than the survivor under a will or the intestacy rules, the survivor may need to buy out that share or agree terms with the beneficiaries. The lending for a buy-out is yours to advise on. The survivor will need legal advice on the estate.
A survivor who now carries the mortgage alone may have cover that was arranged for two incomes, or no cover of their own. If they have children, the household may now depend on one income. Review the survivor's protection once the immediate claims are settled, within your permissions.
If the survivor inherits a pension or receives a life cover payout, the amount of cover they need may change. Agree the order with the planner where the client has been introduced, so the protection recommendation rests on the survivor's settled position.
In the first weeks after a death, the survivor may not want to talk about pensions. Unless a deadline is close, tell them the pension questions exist, that a planner can help and that you will check back. Agree a date with them.
A form of words: "There will be some decisions about pensions to make in the next few months. They are outside what I advise on, and there is time. When you are ready, I can ask a planner at Equity & General to call you. Shall I check back with you next month?"
Joint borrowers are jointly and severally liable, so the survivor is responsible for the whole debt. The lender's bereavement team will discuss the options with them.
You can tell the survivor that pension questions are likely to arise and that a planner can help. Advice on what to do with an inherited pension is pension advice.
Discuss the estate only with the executors, or with the survivor's consent and the executors' agreement where it concerns the estate.
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