ikorodu
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Post by ikorodu on Feb 5, 2015 15:29:22 GMT
Hello!
I am an investor with rate setter.
I was wondering today what would happen to my loans if I were to die?
the ratesetter FAQ says:
We can’t change the name on the Lender’s account or transfer it into another person’s name. We’ll take repayments and the interest earned as usual on behalf of your estate. Once the loan is repaid in full we’ll release the money when the executor of your will instructs us to do so.
So if I have put £50K in a 5 year income loan and die a month later would this mean that my wife (who without any will being made will inherit my estate) will not be able to get access to any of the repaid capital or interest for another 5 years? If that is the case then ratesetter is not the best way of generating an income in retirement as I'd like my wife to be able to use the income from my investments as soon as possible and not in five years time (when she may be dead as well!).
Perhaps someone from ratesetter can confirm what would happen?
Thanks
ikorodu
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oldgrumpy
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Post by oldgrumpy on Feb 5, 2015 15:57:29 GMT
"Once the loan is repaid in full we’ll release the money..."
That is certainly not good enough. What happens to the repayment money while RS is waiting for the remaining payments (of up to five years) to materialise? Does RS pay interest? No. They're not allowed to. They will keep it (and no doubt make use of it, interest free) . On instruction from an executor RS should immediately start selling all holdings over a fairly short time period (say three months) at whatever charges are appropriate and fair. Even better, a facility for a holding to be transferred to a beneficiary complete should be made legally available.
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ramblin rose
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“Some people grumble that roses have thorns; I am grateful that thorns have roses.” — Alphonse Karr
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Post by ramblin rose on Feb 5, 2015 16:08:59 GMT
I suppose a joint account is out of the question? If it were allowed, then either party dying would still allow the other one full access immediately afterwards.
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ikorodu
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Post by ikorodu on Feb 5, 2015 16:38:06 GMT
"Once the loan is repaid in full we’ll release the money..."
That is certainly not good enough. What happens to the repayment money while RS is waiting for the remaining payments (of up to five years) to materialise? Does RS pay interest? No. They're not allowed to. They will keep it (and no doubt make use of it, interest free) . On instruction from an executor RS should immediately start selling all holdings over a fairly short time period (say three months) at whatever charges are appropriate and fair. Even better, a facility for a holding to be transferred to a beneficiary complete should be made legally available.
I agree that its not good. Particularly as the 5 year income option is likely to be seen by some as a good retirement income product. Ratesetter says: "We can’t change the name on the Lender’s account or transfer it into another person’s name"
I'd be interested to know the reason why. Below is the section on transfers for income bonds with NS&I: Transfers 71 A Bond, or part of a Bond, can only be transferred with the consent of the Director. The Director will only give consent in exceptional circumstances. Generally, the Director will give consent in the case of the inheritance of Bonds on the death of a Bond holder, but not to any transfer which is by way of a sale.This seems a more sensible approach to dealing with a death.
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pikestaff
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Post by pikestaff on Feb 5, 2015 16:44:41 GMT
I can't believe that the FAQ means what it says. RS should be obliged to accept the instuctions of the executor (be that to sell or to hold) and to pay cash collected to the estate, as and when requested. Clearing the balance monthly would be OK by me. The ability to transfer accounts whole would be a nice to have, but it's not as important (until a Resolution Event occurs, anyway). The most important thing is for the executor to be able to turn the assets into cash in a reasonable timeframe in order to finalise the administration of the estate. westonkevRS, can you look into this?
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ikorodu
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Post by ikorodu on Feb 5, 2015 16:56:24 GMT
I can't believe that the FAQ means what it says. RS should be obliged to accept the instuctions of the executor (be that to sell or to hold) and to pay cash collected to the estate, as and when requested. Clearing the balance monthly would be OK by me. The ability to transfer accounts whole would be a nice to have, but it's not as important (until a Resolution Event occurs, anyway). The most important thing is for the executor to be able to turn the assets into cash in a reasonable timeframe in order to finalise the administration of the estate. westonkevRS, can you look into this? I too am surprised by the FAQ. I would have thought that the executor legally needs to decide what to do with the loan in line with the contents of the will. If I left a will saying that my wife should get 80% of my loan book and the remaining 20% should go to my kids then the estate would need to remain open for up to 5 years so that the money is finally received. Also what about the reinvestment settings? On death do they revert to holding account?
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ikorodu
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Post by ikorodu on Feb 5, 2015 17:01:15 GMT
Here's what zopa have to say on the death of a lender, which appears to be much more detailed and thought through:
What happens in the event of my death?
In the event of the death of a lender the loan contracts still stand but the benefit passes first to the estate of the deceased and then, if appropriate, on to the ultimate beneficiary. The value of the portfolio is calculated on the date of death as the total capital outstanding plus any funds not yet loaned out. Once Zopa are informed and sent a certified copy of the death certificate we would stop the account from lending more funds and provide details of the account to the administrator or executor. Before any financial changes can be made to the account we would require a certified copy of the Grant of Probate for our records.
Zopa will continue to recover repayments and interest earned on existing loans for the benefit of the deceased lenders estate, until we are permitted to distribute the funds as instructed by the executor, which can be monthly, quarterly etc as agreed with the executor. This process continues until the outstanding loans are fully repaid or otherwise come to an end. Be aware the continuing receipt of interest on existing loans may give rise to a tax liability and the executor will need to address this with Her Majesty's Revenue & Customs or other tax authority as appropriate. Unfortunately, we cannot recover funds that are still on loan to borrowers and not due to be repaid yet; in order to retrieve these funds, the executor, administrator or ultimate beneficiary would need to allow the repayments to accrue within the holding account, before withdrawal.
There is an option to sell the portfolio of loans, for a 1% fee, rather than wait for them to be repaid over time. This can be done through our Rapid Return facility although there are certain restrictions to this policy, which can be found here. If the executor wishes to utilise the Rapid Return facility, upon receipt of satisfactory evidence and compliance with any other Zopa requirements, the personal representative will be permitted to utilise the Rapid Return facility on behalf of the account holder's estate. The standard conditions for this facility apply and any loans that cannot be transferred will continue to run their course; the representative will have access to the funds as and when they are available.
Zopa is unable to change the name on a lender's account as the agreement itself cannot be transferred into another individual's name. A lender is however able to make a request in their Will to leave the funds in their Zopa account and proceeds to a particular individual, although this will be subject to the laws of probate. The important things to consider are how they want the available funds at the date of death to be administered as well as any monies not yet due, i.e. capital outstanding on active loan contracts and the expected interest and repayments on them.
In both cases the more explicit the instructions the better (i.e. who the recipients are and how much each should receive) as we have a duty to act in strict accordance with the individual's Will. In order to meet your wishes, we would simply require the appropriate documentation from your nominated solicitor to carry out these requests. Once probate is completed and we have the relevant documentation we would then deal directly with the beneficiary.
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Post by davee39 on Feb 5, 2015 17:09:47 GMT
Discreetly write down all your passwords and login details. Advise your wife to login as you and start a loan resale process.
I would also advise writing a will and specifically bequeathing the RS account. A will is not expensive and can avoid complications.
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pikestaff
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Post by pikestaff on Feb 5, 2015 17:13:23 GMT
Here's what zopa have to say on the death of a lender, which appears to be much more detailed and thought through: What happens in the event of my death?
[...]
Zopa is unable to change the name on a lender's account as the agreement itself cannot be transferred into another individual's name. A lender is however able to make a request in their Will to leave the funds in their Zopa account and proceeds to a particular individual, although this will be subject to the laws of probate. The important things to consider are how they want the available funds at the date of death to be administered as well as any monies not yet due, i.e. capital outstanding on active loan contracts and the expected interest and repayments on them.
In both cases the more explicit the instructions the better (i.e. who the recipients are and how much each should receive) as we have a duty to act in strict accordance with the individual's Will. In order to meet your wishes, we would simply require the appropriate documentation from your nominated solicitor to carry out these requests. Once probate is completed and we have the relevant documentation we would then deal directly with the beneficiary.I agree, Zopa's guidance is much better. Re the last 2 paragraphs, I would think twice before specifying in my will that the proceeds of a p2p account should go to named individuals. It is a needless complication, and I would quite understand if RS did not want the burden of setting up a mini-trust for the beneficiary(ies). It is much simpler to let the executor collect the proceeds into the estate and distribute them at that level.
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pikestaff
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Post by pikestaff on Feb 5, 2015 17:15:37 GMT
...I would also advise writing a will and specifically bequeathing the RS account... My post crossed with yours. I've taken the opposite view but I'm willing to be convinced...
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Post by oldatheist on Feb 5, 2015 20:40:11 GMT
I look after my elderly mothers finances, and I have helped her set up a RS account but all her cash is in 1 year or monthy at the moment. It would be quite good to put some in the 3 or 5 year as she could go for years, but there is also a high risk she could die tomorrow, and as her executer I don't want that draging on for years, especially as I am not a beneficiary of her small estate.
I can't actually believe the statement in the FAQ, so I have just sent off an email asking for clarification and will report back when I have an answer.
As for the OPs comment about not having a will, I would strongly suggest he and his wife sort this out. I would suggest you check out Intestacy rules before assuming you wife gets everything if you die without a will, for example if you have no children and have an estate over £450k you may find a chunk of money going to a parent or brother you fell out with 10 years ago. If you have children then they would automatically inherit a half the estate after the first £250k.
You also have to think about what would happen to your estate if you both died within 28 days of each other.
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Post by bracknellboy on Feb 5, 2015 22:22:03 GMT
...I would suggest you check out Intestacy rules before assuming you wife gets everything if you die without a will, ... You also have to think about what would happen to your estate if you both died within 28 days of each other. both points are unfortunately frequently not understood.
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Post by pepperpot on Feb 5, 2015 22:36:04 GMT
...as she could go for years, but there is also a high risk she could die tomorrow, and as her executer I don't want that draging on for years,... I'm sure there's a another law you might also want to consider...
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Post by oldatheist on Feb 5, 2015 22:45:36 GMT
A slip of the keyboard, I can assure you I have no intention of bumping her off
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Post by batchoy on Feb 5, 2015 23:39:39 GMT
The other issue that arises is if when you made a will you were foolishly convinced by your solicitor to name him as you executor. As a colleague has recently found with his mother's estate getting a solicitor to relinquish their status as executor is nigh impossible no matter how simple the will. So given the £50k over five years example you have five years solicitors bills to cope with. I also go with pikestaff on not making specific bequests they are a needless and dangerous complication and can cause real issues if things change between the writing of the will and the persons death which they invariably do.
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