Dealing with account of deceased P2P investor
Sept 15, 2018 9:38:17 GMT
lynnanthony, kmac, and 13 more like this
Post by ceejay on Sept 15, 2018 9:38:17 GMT
A little while ago, some of us got to wondering about this, and started to ask platforms what their policies were. We got distracted and never completed (it was just before COL blew up, among other things) but I did get to make some notes, which I might as well put out there now.
NB - there are a few other threads on this topic, including p2pindependentforum.com/thread/11611/happens-when-die (a search for "executor" is a good start)
Getting most of the funds back for the estate of a deceased P2P lender will be easy, or at least no harder than for any other investment. The executor* follows a process and gets sent the money. But where P2P differs from most investments stems from the risk of default: your estate may find itself holding a rump of defaulted or non-performing loans which take forever to repay. The resulting dribble of payments will generate paperwork and, if professionals such as solicitors are involved, costs which may considerably exceed the remaining value.
For example, after clearing out most of my FC account I have a residue which looks like it will be paying out pennies per month for the next ten years!
You don't need to worry about this if any of the following are true:
1 - You're never going to die
2 - You don't care about what happens to your executors or beneficiaries
3 - All of your investments are readily accessible (in "normal markets", anyway) - eg Ratesetter Rolling, Assetz QAA/30DAA, short loans which will repay during the administration period - or in investment trusts such as FCIF which have P2P loans as the underlying asset but which are tradeable
4 - Your executor is also the sole beneficiary [or, to an extent, if executor is one of a number of residuary beneficiaries](though you might also want to consider what happens when the executor dies...)
But, if some of your funds are locked up for whatever reason, and your executor will have to distribute the dribble for years to come, they may have a problem.
So we asked the following questions:
1 - Are there any special arrangements to allow for the cashing in of the investments of deceased lenders, or is it just "normal rules apply"?
2 - Is it possible to transfer the account of a deceased lender to someone else, either an executor or any other person nominated by the executor?
3 - Is there, or might there be in the future, a facility to transfer the benefit of an account to a charity?
4 - Do you allow an account to be held in joint names [not ISAs, obviously] so that the survivor can just take over the account on first death?
5 - What measures do you take to help an executor find out about the account if they don't already know about it - e.g. postal communication if no electronic interaction for 12 months, say?
[not every question was asked of every platform depending on their model and existing FAQ]
The answers were mostly the same, so we'll just deal with the exceptions.
1 - NO
2 - mostly NO, see below
3 - NO
4 - NO
5 - NONE
Platforms and their responses:
==============================
Ablrate - as a smaller platform they seem not to have had much experience of this, but say they should be able to transfer an account
Assetz - will send proceeds to a nominated beneficiary
Folk2Folk - will transfer loan to a nominated beneficiary for no fee [gold star - best response]
Funding Circle - Won't transfer account; email responses can be succinctly summed up as "not our problem". Buying FCIF might be a good workaround, though.
FS - may be able to transfer investments to another account
Ratesetter - no special arrangements, but all loans can normally be sold out (for a fee) so not a huge problem
Didn't ask Zopa but: help.zopa.com/customer/en/portal/articles/1103815-what-happens-in-the-event-of-my-death- (looks like they will take an instruction to split future proceeds, though)
Recommendations
===============
It's often said that the best preparation you can make is to leave a comprehensive list of your investments and it's true that this will be very helpful. However I'd put two other suggestions ahead of that:
1 - make sure your executor can access your email account [this should also cover you from any omissions in your asset list]
2 - if you can, name your beneficiary as executor
And - if you are later in life, and will have multiple beneficiaries, consider simplifying or shifting your portfolio to reduce the risk of rump streams of income causing nightmares for your executor(s), and avoid the least helpful platforms.
Conclusion
==========
The platforms' responses varied a lot. If this issue matters to you, consider your position and the platforms you are in. Some of the responses we had flatly refused to recognise the issue, or were simply dismissive of it, or hid behind spurious pseudo-legal excuses. Yes, there are complications including money laundering regulations, but with a little goodwill they could do a lot better. It shouldn't be that hard: all they need to do, once the initial wedge of easily accessible money has been withdrawn, is transfer the account to a nominated beneficiary. It would also be great if they could figure out how to transfer the benefit of a small residual to a charity so that executors could just forget the whole thing!
*executor: strictly speaking "personal representative" but "executor" is shorter! See www.gov.uk/wills-probate-inheritance or www.citizensadvice.org.uk/family/death-and-wills/dealing-with-the-financial-affairs-of-someone-who-has-died/ if you are new to this.
NB - there are a few other threads on this topic, including p2pindependentforum.com/thread/11611/happens-when-die (a search for "executor" is a good start)
Getting most of the funds back for the estate of a deceased P2P lender will be easy, or at least no harder than for any other investment. The executor* follows a process and gets sent the money. But where P2P differs from most investments stems from the risk of default: your estate may find itself holding a rump of defaulted or non-performing loans which take forever to repay. The resulting dribble of payments will generate paperwork and, if professionals such as solicitors are involved, costs which may considerably exceed the remaining value.
For example, after clearing out most of my FC account I have a residue which looks like it will be paying out pennies per month for the next ten years!
You don't need to worry about this if any of the following are true:
1 - You're never going to die
2 - You don't care about what happens to your executors or beneficiaries
3 - All of your investments are readily accessible (in "normal markets", anyway) - eg Ratesetter Rolling, Assetz QAA/30DAA, short loans which will repay during the administration period - or in investment trusts such as FCIF which have P2P loans as the underlying asset but which are tradeable
4 - Your executor is also the sole beneficiary [or, to an extent, if executor is one of a number of residuary beneficiaries](though you might also want to consider what happens when the executor dies...)
But, if some of your funds are locked up for whatever reason, and your executor will have to distribute the dribble for years to come, they may have a problem.
So we asked the following questions:
1 - Are there any special arrangements to allow for the cashing in of the investments of deceased lenders, or is it just "normal rules apply"?
2 - Is it possible to transfer the account of a deceased lender to someone else, either an executor or any other person nominated by the executor?
3 - Is there, or might there be in the future, a facility to transfer the benefit of an account to a charity?
4 - Do you allow an account to be held in joint names [not ISAs, obviously] so that the survivor can just take over the account on first death?
5 - What measures do you take to help an executor find out about the account if they don't already know about it - e.g. postal communication if no electronic interaction for 12 months, say?
[not every question was asked of every platform depending on their model and existing FAQ]
The answers were mostly the same, so we'll just deal with the exceptions.
1 - NO
2 - mostly NO, see below
3 - NO
4 - NO
5 - NONE
Platforms and their responses:
==============================
Ablrate - as a smaller platform they seem not to have had much experience of this, but say they should be able to transfer an account
Assetz - will send proceeds to a nominated beneficiary
Folk2Folk - will transfer loan to a nominated beneficiary for no fee [gold star - best response]
Funding Circle - Won't transfer account; email responses can be succinctly summed up as "not our problem". Buying FCIF might be a good workaround, though.
FS - may be able to transfer investments to another account
Ratesetter - no special arrangements, but all loans can normally be sold out (for a fee) so not a huge problem
Didn't ask Zopa but: help.zopa.com/customer/en/portal/articles/1103815-what-happens-in-the-event-of-my-death- (looks like they will take an instruction to split future proceeds, though)
Recommendations
===============
It's often said that the best preparation you can make is to leave a comprehensive list of your investments and it's true that this will be very helpful. However I'd put two other suggestions ahead of that:
1 - make sure your executor can access your email account [this should also cover you from any omissions in your asset list]
2 - if you can, name your beneficiary as executor
And - if you are later in life, and will have multiple beneficiaries, consider simplifying or shifting your portfolio to reduce the risk of rump streams of income causing nightmares for your executor(s), and avoid the least helpful platforms.
Conclusion
==========
The platforms' responses varied a lot. If this issue matters to you, consider your position and the platforms you are in. Some of the responses we had flatly refused to recognise the issue, or were simply dismissive of it, or hid behind spurious pseudo-legal excuses. Yes, there are complications including money laundering regulations, but with a little goodwill they could do a lot better. It shouldn't be that hard: all they need to do, once the initial wedge of easily accessible money has been withdrawn, is transfer the account to a nominated beneficiary. It would also be great if they could figure out how to transfer the benefit of a small residual to a charity so that executors could just forget the whole thing!
*executor: strictly speaking "personal representative" but "executor" is shorter! See www.gov.uk/wills-probate-inheritance or www.citizensadvice.org.uk/family/death-and-wills/dealing-with-the-financial-affairs-of-someone-who-has-died/ if you are new to this.
