When a loved one dies, dealing with their debts can make a hard time even more difficult.
You may be worried about a family member who is struggling with debt and wonder whether you will inherit this debt when they die. Or perhaps you are in debt yourself and are worried about leaving it to your partner or children.
When someone dies, their provable debts will be paid out of their estate which includes their money, property, and any other assets left behind. These debts must be settled before anything left over from the estate can be divided between beneficiaries.
Who is responsible for paying family member’s debt?
The executor of the will is responsible for ensuring all debts are paid. If there is no will, the responsibility is on the administrator. The executor or administrator is not personally liable for the deceased person’s debt unless they fail to deal with the estate adequately.
If I am the executor, what do I need to do?
- The first step is to go through the deceased’s paperwork, including their bank statements and list everything they owe and who to. To reduce the risk of being liable for debts you are not aware of, it is a good idea to publish a Statutory Notice under the Trustee Act. This is an official notice placed in the London Gazette and a local newspaper which asks creditors to come forward. The solicitors from our Wills, Trusts and Estates team can assist with this and provide further advice and guidance on reducing the risk of personal liability.
- When you are aware of the debts owed, contact the organisations and people that the deceased owes money to. You will need to:
- Make them aware that the person has died
- Ask them for the outstanding balance due
- Check if a PPI policy applies to the debt
- Check for any joint debts, such as mortgages or overdrafts on joint accounts
- The debts will need to be paid in a specific order depending on whether the estate is solvent or insolvent. The order may be as follows:
- Secured debts. These need to be paid before anything else such as reasonable funeral costs
- Priority debts, including any tax debts
- Unsecured debts such as personal loans and credit cards
What if there is not enough money in the deceased’s estates to cover the debts?
If there is not enough money to pay off all the debts, you must pay off as much as you can with the money available, in the priority order above.
The creditors will usually write off the debt that is remaining. However, if you find yourself in this situation, we highly recommend you speak to one of our experienced probate solicitors.
Are there any debts that I could be responsible for?
There are a few debts that can be passed over automatically when a person dies. If someone is living in the deceased’s house, they could then become responsible for arrears in household bills.
If you have a joint financial product or are a guarantor for one of the deceased’s financial products, you will become liable when they die. For example, if you had a joint mortgage with your partner, this debt would pass solely into your name.
If you would like to discuss any points in this article further or are looking for independent advice regarding family member’s debt, please contact Spire Solicitors LLP on 01603 677077.