Debt after death

November 22nd, 2021

Coping with the death of a loved one is difficult enough. But if you then suddenly find that you’re being chased for their debts then the grieving process can become far more complicated and pressurised. Who is responsible for those debts? And what happens if a person dies without a will? Let’s take a look at debts after death and who pays the bills when someone dies.

Joint loans

This situation is relatively straightforward. If a couple have taken out a loan together and one of them dies, in the majority of instances the outstanding debt will pass to the survivor. If the debt is a mortgage then you’ll only be required to make the monthly mortgage payments. If you’re joint tenants in a rented property then obviously, the property remains in the landlord’s possession, but the tenancy will pass to the surviving partner. Bear in mind that if you’ve bought a property together and are ‘tenants in common’ then the property does not automatically revert to the surviving partner, but is distributed according to the will or intestacy rules.

What about credit card debts?

It’s not true that a credit card debt dies with you. These are regarded as individual debts and will be paid off from the estate. If there isn’t enough money to pay the cards off then the debt may be written off. If your husband, wife or civil partner died and had an outstanding debt on a card that was solely in their name and wasn’t part of a joint account, you won’t become responsible for repaying that debt.

Credit card debts, personal loans and credit debt will usually be dealt with by the estate once all other debts have been paid off, so they’re relatively low down the scale. If, however, you have joint cards then you’ll need to contact your lender to see if you’re covered by a payment protection plan or if the loan reverts over to you after your partner has died.

Tax debts

If the deceased owed HMRC or VAT payments then these will usually be covered by the estate. However, if there isn’t enough to pay them then these are usually written off. Government debts (such as tax) takes precedence over personal debts.

Bank accounts

If you and your partner had a joint bank account then you should still be able to access the funds without any issues. However, if the account was in the sole name of the deceased then it cannot be touched until the estate has been sorted out according to the will.

What about insurance?

There may be policies in place that pay out in the event of the holder’s death, so it’s important that all providers are contacted straight away, and to ensure that any monthly premium arrangements are brought to a close. For homeowners, life insurance is often a prerequisite of a mortgage agreement. If there is no life policy to cover the mortgage, and the will’s beneficiaries do not want to take on (or cannot take on) the mortgage, then the property may be sold off to cover any outstanding debts. Any monies left over after the sale will then be distributed through the estate.

Are you responsible for undisclosed debts?

Debt is not ‘inherited’ in the UK, so your family, friends or partner will not become responsible for any debts in the event of your death. Dealing with most types of debt is relatively straightforward, but you may find that the deceased had ‘undisclosed debts’ that you didn’t know about before they died. If you suspect that may be the case then you can check to find out by placing a Deceased Estates Notice in a local newspaper.

You’re not obligated to do so, but if you don’t and a creditor comes forward after the estate has been distributed (including to any creditors) then you may become responsible for the debt. To make sure creditors have adequate time to make themselves known, it’s advisable to leave around two months between issuing a Deceased Estates Notice and distributing the estate.

With such complicated provisos surrounding debt, even after a person has died, it’s all the more important to ensure that you have a will in place to ensure that your loved ones are not left trying to sort out complex outstanding debts after you’ve gone. If you’re not sure what ‘getting your affairs in order’ really means, and want to make sure your loved ones don’t have to deal with even more emotional upset after you’ve died, talk to a wills, trust and probate specialist today.