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  • Writer's pictureEmma Aslett

When I pass away – what happens to my debt?

A frequently asked question by our clients: when I pass away, will my debts be wiped clean? The answer is no if you have the money to pay it back.

Generally speaking, when we pass away, our debts are paid out from the monies within the estate. Our beneficiaries thereafter receive the net estate (i.e. balance after debts, including inheritance tax and funeral expenses).

The only time in which debt will be “written off” is if there is not enough money within the estate to pay it all. There is an order to priority as to which creditors receive monies to pay debts. For example, after funeral expenses and inheritance tax, mortgages (and any other secured creditors) will likely be paid in the first instance. Thereafter, unsecured creditors will be repaid.

If you are an Executor - how to manage debt?

It is important to make sure that all of the debts are paid. Even though they are not “your” debts, your role as Executor takes on the responsibility of paying the debts and does come with personal risks if they are not paid or, at least, you have made enough effort to locate all creditors.

How many Executors (or Administrators) protect themselves from any potential creditors is by putting a notice in the Gazette and local newspaper where the deceased resided. The notice allow creditors to come forward to advise the estate of their debt so it can be paid.

Many people undertake the role of Executor (or Administrator) without understanding the full implications of undertaking such a role. This is a good example as to why it is important to take legal advice to make sure that undertaking such a role out of the goodness of your heart does not come back to "bite you" personally (and financially!).

Emma Aslett

0207 183 4595

The information provided in this article is not intended to constitute professional advice and you should take full and comprehensive legal, accountancy or financial advice as appropriate on your individual circumstances by a fully qualified Solicitor, Accountant or Financial Advisor/Mortgage Broker before you embark on any course of action.

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