Let's walk through what happens to our debts when we pass.¹ (MoneySense March 2023)
Who's responsible for debt after death?
- The answer depends on a few factors, like the amount of debt you have, who's listed on the accounts and your insurance coverage.
- After death, debts usually fall to the estate. If you have a will, your executor will create an inventory of your assets and liabilities.
- With or without a will, your debts must be repaid before your estate's assets and holdings can be distributed to your beneficiaries
What can creditors come after?
- If your estate has cash in bank accounts, creditors can come after what you owe them. Any assets under your estate, including property, vehicles and are also fair game for a creditor to claim
What happens when you have debt and you don't have cash or assets when you pass?
- Most of the time creditors will have no opportunity to collect
What happens to your mortgage debt when you die?
- If you're planning to leave your house to your kids, have you considered what would happen to the remaining balance on your mortgage?
- If you have mortgage protection insurance, it might cover the balance. If you don't have mortgage insurance and your beneficiary's name goes on property title, they become responsible for the rest of the loan. From there, your beneficiary might elect to continue making payments and keep the property. Or, they can choose to sell the home
- If you have a mortgage with your spouse, the spouse would be responsible after your death
Who pays your credit card debt and other debts when you die?
- Credit card debt and other unsecured arrears cannot be passed down to your kids or partner. BUT that's only true for credit card accounts solely under your name. If the credit card is jointly held with a family member, they'll inherit that responsibility - even if they didn't spend the money
- Can credit card companies come after your estate for an unpaid balance? It depends on whether your estate has anything to offer. If your estate has cash and assets, creditors can make a claim. While the credit card debt may not be your family's responsibility, it can affect their inheritance
- If you die without any assets, then the debt dies with you. If the debt is secured, like in the case of a car loan or home equity line of credit, the creditor might repossess the collateral if the estate doesn't have enough capital to repay the loan.
Sincerely,
Mike Busby (1-May-23)
THE COMMENTS CONTAINED HEREIN ARE A GENERAL DISCUSSION OF CERTAIN ISSUES INTENDED AS GENERAL INFORMATION ONLY AND SHOULD NOT BE RELIED UPON AS TAX OR LEGAL ADVICE. PLEASE OBTAIN INDEPENDENT PROFESSIONAL ADVICE, IN THE CONTEXT OF YOUR PARTICULAR CIRCUMSTANCES. THIS ARTICLE WAS WRITTEN, DESIGNED AND PRODUCED BY MIKE BUSBY FOR THE BENEFIT OF MIKE BUSBY WHO IS A FINANACIAL ADVISOR FOR BRANDON LINDSAY INSURANCE AGENCIES, A TRADE NAME REGISTERED WITH INVESTIA FINANCIAL SERVICES INC., AND DOES NOT NECESSARILY REFLECT THE OPINION OF INVESTIA. THE INFORMATION CONTAINED IN THIS ARTICLE COMES FROM SOURCES WE BELIEVE RELIABLE, BUT WE CANNOT GUARANTEE ITS ACCURACY OR RELIABILTY. THE OPINIONS EXPRESSED ARE BASED ON AN ANALYSIS AND INTERPRETATION DATING FROM THE DATE OF PUBLICATION AND ARE SUBJECT TO CHANGE WITHOUT NOTICE. FURTHERMORE, THEY DO NOT CONSTITUTE AN OFFER OR SOLICITATION TO BUY OR SELL ANY SECURITIES. MUTUAL FUNDS OFFERED THROUGH INVESTIA FINANCIAL SERVICES INC.
