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Can a creditor chase the nominee of cash from a credit union account?

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  • 15-09-2020 4:25pm
    #1
    coylemj
    Registered Users Posts: 25,336 ✭✭✭✭


    There was a discussion recently in the Banking forum about a nomination under S.21 of the Credit Union Act 1997. This is a facility whereby a member can nominate a person to receive up to €23,000 of their savings when they die. The money can be paid out independent of probate and nothing in a person's will can vary or cancel the nomination.

    http://www.irishstatutebook.ie/eli/1997/act/15/section/21/enacted/en/html#sec21

    The proposition which was raised is this: in the absence of any other assets, could a creditor chase the nominee for money in respect of a debt owed by the (now deceased) nominator?

    Alan knows that he has a terminal illness, his sole asset is 15,000 cash. He owes 20,000 to Brian but is determined that the debt will not be paid. He opens a credit union account, lodges the 15,000 and fills out a nomination for all of the money in favor of Caroline. Alan then dies and the CU hands the money over to Caroline.

    Can Brian chase Caroline for the debt and if not, is there any case law which says so? Because there appears to be nothing in the Credit Union Act which would block this i.e. at no stage does it say that the money which is the subject of a nomination is protected from all claims on the estate. S.22 authorises the directors of the CU to pay the money to the nominee so they are covered i.e. Brian probably would not succeed if he sought an injunction to prevent them paying out.


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    #2
    [Deleted User]
    Posts: 14,344 ✭✭✭✭ [Deleted User]


    Doesn't your debt die with you?

    Unsecured debt (personal loans, etc) disappear and secured ones (mortgage, etc) have insurance either built into them or taken out separately, but as part of the loan agreement (which the insurance would cover the remainder of the cost on)?


    Or am I spreading an urban myth?


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    #3
    coylemj
    Registered Users Posts: 25,336 ✭✭✭✭coylemj


    Deleted User wrote: »
    Doesn't your debt die with you?

    ...

    Or am I spreading an urban myth?

    Mortgages and credit union loans are often covered by insurance which pays the outstanding debt when the borrower dies during the term of the loan.

    But since you asked. Yes, you are spreading an urban myth, there is no automatic debt forgiveness at death.


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    #4
    GM228
    Registered Users Posts: 8,925 ✭✭✭GM228


    Can't think off hand of any case specific on the issue, but perheps the creditor could ground a case of unjust enrichment against the nominee, but would it pass the three stage test for such, namely:-

    1. The nominee has been enriched - yes

    2. This enrichment was at the expense of the creditor - it is at the expense of the CU, but, it could be argued the loss to the creditor amounted to their expense (or could it??)

    3. The enrichment was unjust - again i could be argued it was given the circumstances surrounding the nomination.

    Perhaps you could link the othet thread, I would be interested in the arguments put forward.


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    #5
    coylemj
    Registered Users Posts: 25,336 ✭✭✭✭coylemj


    GM228 wrote: »
    creditor - it is at the expense of the CU, but, it could be argued
    Perhaps you could link the othet thread, I would be interested in the arguments put forward.

    I'm on a mobile with poor coverage and can't post a link but it would serve no purpose if you read the thread I mentioned. There was no 'discussion' of any kind on the topic I've raised here. The scenario was posited by a poster but nobody could answer the question.


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    #6
    Akesh
    Closed Accounts Posts: 315 ✭✭Akesh


    No, as it is independent of probate there is no legal recourse for the creditor in such a scenario. Unjust enrichment only applies in very specific circumstances and wouldn't apply in this scenario. The law is particularly vague in respect of unjust enrichment.


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    #7
    GM228
    Registered Users Posts: 8,925 ✭✭✭GM228


    Akesh wrote: »
    No, as it is independent of probate there is no legal recourse for the creditor in such a scenario. Unjust enrichment only applies in very specific circumstances and wouldn't apply in this scenario. The law is particularly vague in respect of unjust enrichment.

    Your saying the law is vague on one hand whilst saying an absolute no on the other, it can apply when the 3 part test is satisfied, that is well established and far from vague, the problem however is establishing each point successfully.

    Edit, I had totally forgotten the test was modified by the Supreme Court in 1996 as follows:-

    1. The enrichment of the defendant;

    2. at the plaintiff's expense;

    3. in circumstances in which the law requires restitution (the "unjustness" of the enrichment); and

    4. The absence of defences or other policies to deny restitution.

    So yes perhaps 3 and 4 puts it past such a claim in such a case.


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    #8
    Garibaldi?
    Registered Users Posts: 445 ✭✭Garibaldi?


    If someone dies owing for utility bills, car loans etc etc(well-documented transactions) and has money in the CU, does that money go to the nominee instead of the creditors? What about Revenue? Surely debts are a priority over all else after funeral costs.


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    #9
    coylemj
    Registered Users Posts: 25,336 ✭✭✭✭coylemj


    Garibaldi? wrote: »
    If someone dies owing for utility bills, car loans etc etc(well-documented transactions) and has money in the CU, does that money go to the nominee instead of the creditors?

    Yes, S.22 of the act allows the directors to pay the nominee. They have no duty to the executor of the estate or to any creditors of the deceased.


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    #10
    [Deleted User]
    Posts: 14,344 ✭✭✭✭ [Deleted User]


    coylemj wrote: »
    Mortgages and credit union loans are often covered by insurance which pays the outstanding debt when the borrower dies during the term of the loan.

    But since you asked. Yes, you are spreading an urban myth, there is no automatic debt forgiveness at death.




    Are you sure? Is it not a legal thing, but applied in practice?


    I ask as I've never heard of anyone dying, and Electric Ireland trying to shake down the family for an unpaid bill, or Virgin Media reps attending the funeral to put pressure on the family (exaggerations, of course, but you get what I mean).


    I presumed the whole point in unsecured debt is that it's not secured, and thus carries a higher interest rate (than a typical mortgage, which is secured, for example). Therefore if you decide to not bother paying, or in this event, die, then the lender has little comeback on it?


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    #11
    Marcusm
    Registered Users Posts: 10,195 ✭✭✭✭Marcusm


    Deleted User wrote: »
    Are you sure? Is it not a legal thing, but applied in practice?


    I ask as I've never heard of anyone dying, and Electric Ireland trying to shake down the family for an unpaid bill, or Virgin Media reps attending the funeral to put pressure on the family (exaggerations, of course, but you get what I mean).


    I presumed the whole point in unsecured debt is that it's not secured, and thus carries a higher interest rate (than a typical mortgage, which is secured, for example). Therefore if you decide to not bother paying, or in this event, die, then the lender has little comeback on it?

    The executor or administrator of the estate has the obligation to settle the deceased’s debts out of the estate’s assets. The debts don’t disappear. The point here is that the asset does not fall to be regarded as part of the estate. The reason why you don’t find utilitybcompanies attending funerals is that they are unlikely to be aware of the death. The personal representative of the deceased (whether administrator or executor) would assess the assets and liabilities and settle such debts as can be covered by the assets. If the executor/administrator distribute the assets without settling the liabilities they can become personally liable for them.


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    #12
    coylemj
    Registered Users Posts: 25,336 ✭✭✭✭coylemj


    [Deleted User] wrote: »
    Are you sure? Is it not a legal thing, but applied in practice?

    It's the duty of the executor to discharge all lawful debts and you will often see legal notices in the papers calling on the creditors of so and so to submit their claims to a firm of solicitors acting for the executor.

    But I get your point and in practice, I'm guessing that utility companies and the like write off the last monthly bill when someone dies and they don't hear from any executor.


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    #13
    Peregrinus
    Registered Users Posts: 26,059 ✭✭✭✭Peregrinus


    Utility companies generally expect whoever is living in the house to pay the account and they mostly do, because they don't want to get cut off. Formally the executor could terminate the account and clear off any balance of out estate funds, and the a new account be opened by e.g. the widow. But in practice the widow simply pays the bills as they fall due and the redesignation of the account in the widow's name may happen much later, or occasionally not at all.

    If the property is left vacant on the death of the accountholder and the utility service is terminated the utility provider does expect the executor to pay in time, and most executors do because why wouldn't you? But the amount involved is usually to modest for the utility provider to chase it up if it's not paid.


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    #14
    Peregrinus
    Registered Users Posts: 26,059 ✭✭✭✭Peregrinus


    GM228 wrote: »
    Your saying the law is vague on one hand whilst saying an absolute no on the other, it can apply when the 3 part test is satisfied, that is well established and far from vague, the problem however is establishing each point successfully.

    Edit, I had totally forgotten the test was modified by the Supreme Court in 1996 as follows:-

    1. The enrichment of the defendant;

    2. at the plaintiff's expense;

    3. in circumstances in which the law requires restitution (the "unjustness" of the enrichment); and

    4. The absence of defences or other policies to deny restitution.

    So yes perhaps 3 and 4 puts it past such a claim in such a case.
    I think a good deal is going to depend on the facts. If there's evidence that the debt was originally incurred with the intention of evading payment in this way, or that the transfer is predominantly motivated by a desire to defeat creditors rather than, say, to discharge a moral obligation to a dependant, or that the beneficiary of the nomination is a knowing party to a scheme to defeat creditors, a claim for unjust enrichment might stand up. But you'd need good evidence of unusual facts. On a straightforward case where I leave a nomination in favour of my dependent spouse, with nothing more, it would be very hard to run unjust enrichment successfully.

    Note that the same result can be achieved, and without any tiresome monetary cap, by keeping bank accounts and other investments in joint names.


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    #15
    joeguevara
    Registered Users Posts: 8,017 ✭✭✭joeguevara


    Insurance will not match the shares if underlying illness. The payment to nominee is not checked for wills or outanding debt. Credor can sue while still alive.


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    #16
    bobbyy gee
    Banned (with Prison Access) Posts: 1,306 ✭✭✭bobbyy gee


    your money
    https://www.irishtimes.com/business/personal-finance/don-t-die-before-you-read-this-what-happens-to-your-money-if-you-die-unexpectedly-1.2962525?mode=amp


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    #17
    coylemj
    Registered Users Posts: 25,336 ✭✭✭✭coylemj


    bobbyy gee wrote: »
    your money
    https://www.irishtimes.com/business/personal-finance/don-t-die-before-you-read-this-what-happens-to-your-money-if-you-die-unexpectedly-1.2962525?mode=amp

    Makes no mention whatsoever about the subject of a CU nomination.


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