Who is responsible for debt after death?

When it comes to debt and inheritance in the UK, there are a number of commonly held misconceptions. Many people believe that when a person dies, their debt dies with them, however this is not the case. Another common misconception is that the task of paying off a loved one’s debts immediately falls to family members after they’re gone. 

We’ve put together this handy guide on debt and inheritance to help with clarifying who is responsible for debt after a person’s death.  

What will happen to my debt when I die? 

Many people believe that any debt they have accrued in their lifetime will be written off when they die, however this is simply not the case. 

When putting together your will, you will be encouraged to outline the person you would like to take care of your estate - your property, finances, personal possessions, etc. - in the event of your death. 

If you have accrued debts through taking out personal loans, credit cards, or a mortgage, these will be taken into account with the review of your estate, and your assets will normally be used to pay off your debts. Your executor - the person you have entrusted with the task of managing your estate - will be responsible for organising these repayments. 

Before they are required to begin considering making repayments for your debt, your executor will be permitted to use some of your assets to cover the cost of your funeral and any administration fees associated with your death if you do not have applicable insurance policies in place. 

Once the costs of your funeral have been taken care of and the executor has acquired a grant of probate, they can then commence the process of repaying your debts. This will need to take place before any money can be distributed to friends and family members in the form of inheritance (as you might have outlined in your will). 

What will happen if I owe money to a number of creditors? 

If you owe money to a number of different creditors, your executor will be required to repay those creditors according to a specific order, which is as follows: 

  • First: Secured debts (such as mortgage repayments) 
  • Second: Priority debts (such as income tax and council tax) 
  • Third: Unsecured debts (such as credit cards and utility bills) 

What will happen to my mortgage when I die? 

If you have a mortgage in place, your partner (i.e. your spouse, registered civil partner, or cohabiting partner) will be legally required to continue making mortgage repayments in the event of your death, however they will not be required to pay off or contribute towards any of your other debts (credit cards, loans, etc). 

If you are the sole owner of your property, your executor will usually be required to treat your mortgage as any other debt and use your assets for repayment. Depending on how much is still owed on your mortgage, this may mean having to sell the property in order to clear the debt. 

How are joint debts impacted by a person’s death? 

Examples of a joint debt include joint mortgages and joint current accounts with an overdraft. In most cases where two or more people have taken out a joint loan together, the outstanding debt will simply be passed to those people in the agreement who are surviving. 

If you are joint tenants in a property, that property will not form part of your estate (except for the purposes of calculating Inheritance Tax). In such instances, the surviving tenant automatically will automatically receive the deceased’s share and ownership of the property.

Contrarily, if you are joint owners under tenancy in common, this will mean you each own defined shares of the property’s equity. As such, in the event of your death, your share will not pass automatically to the surviving tenant, but rather will be distributed according to the wishes outlined in your will. 

What will happen to my mortgage debt if I don’t have life insurance? 

If you have not taken out a life insurance policy covering your mortgage, and if the beneficiaries named in your will do not wish to obtain the mortgage, or do not qualify for a mortgage, then your executor may choose to sell your property in order to pay off the outstanding debt. 

Will my family have to pay my debts when I die? 

In the UK, debt is not inherited, so your friends and family, including a partner or spouse, will not become responsible for your individual debts in the event of your death. 

The only time a family member or friend will be required to take responsibility for your debts is if you entered into a joint loan or agreement with them. 

Will my credit card debt die with me? 

It is a commonly held belief that credit card debts are automatically written off in the event of a person’s death, however this is incorrect. Any debts you leave behind on your credit card are not automatically written off, but should be paid off with your assets. It is only in the instance where there is not enough money left behind in an estate that credit card debt may be written off. 

How can I make a will? 

Making a will doesn’t need to be a complicated or daunting task. In fact, with the expert solicitors here at DRN to guide you through the process, making your will is simple, straightforward and stress-free. 

Having a written will in place is the only way to ensure your wishes are met upon the event of your death. Merely outlining your wishes to a member of your family or a close friend is not enough to ensure your estate is handled as you would like it to be. 

Our solicitors, based in Lancashire, have years of experience in handling wills, probate and inheritance, and are each dedicated to providing the very best standards of client service, including with the provision of sound, reliable advice that you can trust. 

Make a start on writing your will today by filling out our online form, or call our offices for more information.