What Happens to My Debts When I Die?

Debts are resilient, outliving their owners.

Far from wiping the slate clean, a person’s death often brings to light the full extent of their liabilities. There may well be the more usual type of debt like a mortgage, a loan, or a tax bill that must be taken care of as part of the process of sorting out that person’s affairs. There may also be debts that take family members by surprise; a significant overdraft or credit card liability, for example.

The first question that needs to be asked is: whose debt is it? It might be an individual debt, run up and owned by the person who has died and which becomes payable out of the estate. It might be a joint debt, in which case the joint owner(s) will usually have to take some responsibility for settling it. It might be a debt that has been guaranteed by someone else who must then ensure that it is paid.

So how your debts will be dealt with, and how they will affect those close to you, will depend on their legal set-up. And this is something that you may be able to do something about now. Some people look to rearrange their finances in a way that better protects their loved ones and their estate from losing out later on.

Because, aside from the difficulties that can be caused to a person who remains jointly liable for a deceased person’s debt (including potentially having to sell the family home), there is the issue of the depletion in the value of the estate. Debts are paid off before the beneficiaries receive their share. In some cases, this means that family members and friends miss out completely because the level of the deceased’s debt exceeds the value of the estate; there is nothing left for them.

With that in mind, those responsible for dealing with a deceased person’s estate will usually check to see if any of the debts are covered by insurance. There may be some cover that will pay out, reducing the extent of the liabilities that need to be met directly by the estate. It’s something to consider when you’re looking to borrow money during your lifetime.  

So our advice is to get organised. Get a handle on your liabilities and put in place now the safeguards that will improve the position of those you care about.  

Contact our dedicated Probate Team today, who will be happy to run through any concerns you may have. You can call a member of our team on 01264 353411, email wills@bsandi.co.uk or complete our no-obligation enquiry form on our website and someone will be in touch shortly.