Debt does not disappear when you die. It becomes part of your estate.
How debt is handled
The executor must first:
- identify all debts
- notify creditors
- settle debts before distributing inheritances
Creditors are paid before beneficiaries.
Common debts
These include:
- personal loans
- car finance
- credit cards
- overdrafts
- store accounts
- mortgage bonds
Can beneficiaries inherit your debt
No. They do not inherit the debt, but they may receive less if the estate must settle outstanding balances.
What if the estate has more debt than assets
If the estate is insolvent, creditors are paid in a specific order. Beneficiaries may receive nothing.
Protecting your family
People often use:
- life cover
- income protection
- funeral cover
- estate planning tools
These help reduce the impact of debt on your family.