What happens to debt when you die?
If you don’t plan for it, your loved ones could be lumped with your debts after you die.
Your debts don’t die with you
A common myth is that your debts die when you do. In fact, debt is not automatically wiped out unless provisions have been made to cover it.
Dealing with someone else’s bills can be complicated, so we’ve broken down the key things you need to know.
The information in this article applies specifically to England and Wales. There are some differences in Scotland and Northern Ireland.
Can you inherit debt?
When someone dies in the UK no one ‘inherits’ their individual debts. Instead, what happens is that any money owed comes out of the person’s estate.
The estate is the sum of their property, money, possessions and assets. If there isn’t enough money in the estate to pay off everything owed, it becomes known as an ‘insolvent estate’. This means that debts will need to be paid for in the following order:
When you could be affected
There are a few debts that can be passed over automatically when a person dies. Anyone still living in the deceased person’s house could become responsible for any arrears in household bills, even if their name isn’t actually on the bill.
Additionally, if you have a joint financial product with someone or are a guarantor on one of their financial products, you will become liable for it in the event of their death. So if you have a joint loan or mortgage with your partner, this debt would pass over solely to you as your name is on the credit agreement – even if you weren’t making any payments before this.
If you own a house together
If you jointly own property with someone who has passed away, and there isn’t enough money from elsewhere in their estate to pay for their individual debts, there is a chance you may have to sell the home to repay creditors – even if there is no mortgage on it. This depends on whether you own the home as “tenants in common” which means that both of you own a stated share of the property or “joint tenants”- this is when you own the whole property together.
If property is owned as tenants in common, the deceased’s share would pass to their estate – and in turn to creditors – and you may have to sell it to pay them unless you can negotiate otherwise. However, if you were joint tenants, the deceased person’s share never enters their estate and instead passes straight to you.
Where there’s a will there’s a way?
It’s easy to assume that by leaving property or possessions to your family and friends in your will, this guarantees they’ll be passed to them and be safe from creditors. However, it is in fact a legal requirement that any debts are settled before assets can be given to the beneficiaries. In some cases, this may mean selling a home that someone is already living in, or parting with something of sentimental value that’s been in the family for a long time.
Read our What is probate? guide to learn more.
When insurance might help
Some mortgages may be protected by an insurance policy that can shield you from inheriting the joint holder’s share of the debt when they die. Credit cards and loans can also include a payment protection plan that could help clear the balance. And if the deceased was still working, their employer might have offered a ‘death in service’ pay-out that could help pay debts.
It can be frustrating to realise that our families won’t fully benefit from our assets when we’re gone, so if you have debts but still want to leave money to close relatives, you could look for a life insurance policy that gives you the option to write the policy into trust. This means you can name specific beneficiaries for your policy, so you'll know your money will go to who you want to have it when the times comes. Over 50s life insurance is one kind of life insurance policy that can offer this.

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