What happens to my debts when I die?

Where do I start?

Dealing with the aftermath of losing someone you care about can be tough. Most of us don't want to think about it, but there's more to handle than just the emotions. There are practical things too, like sorting out their affairs.

One big issue is money. If the person who passed away still owes money when they die, things can get a little complicated. You might think that debts disappear when someone dies, but that's not usually the case.

When someone dies, everything they own forms their estate. Someone, either named in a Will or the next of kin if there's no Will, is responsible for managing this. They are called an executor if there is a Will or the Personal Representative if there’s no Will. This person pays off any debts from the estate's assets.

If there's not enough money in the estate to cover everything owed, creditors get paid in a certain order. Funeral costs and taxes come first, then secured debts like mortgages, followed by unsecured debts like loans and credit cards. Only after all debts are paid can beneficiaries receive what's left.

Who deals with these debts?

It's the job of the executor or administrator, but they're not personally responsible for paying the debts. However, taking on these roles carries some risks.

If you are named as executor or you’re the next of kin, to protect yourself, it's a good idea to announce the death in a local newspaper. This will let creditors know and give them a chance to claim what they're owed before the estate is distributed. If things are complicated, it might be wise to get legal advice.

How do you handle these debts?

First, gather all the details about what's owed. Look through documents like bank statements to make a list. Then, figure out what type of debt each one is.

There are different kinds.

Individual debts are only in the deceased's name and get paid from the estate.

Joint debts are shared with someone else, who might still be responsible for paying.

Secured debts are tied to something, like a house, and unsecured debts aren't.

Sometimes, debts pop up later that you didn't know about. Not putting a notice in the newspaper could leave you on the hook for these surprises.

If you're feeling overwhelmed, there are services that can help you navigate this process smoothly.