How do debts work after someone has died?

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Part 1

Is debt inherited?

When someone dies, their debts are not written off, but they are also not inherited. Instead, the money must be paid back from the estate of the person who died. If someone dies with outstanding debts that cannot be paid in full with money from the estate, then the estate is known as ‘insolvent’. The executors or administrators of the estate are never expected to pay off debts using their own money. In the case of an insolvent estate, the debts are simply written off.

If your partner died, leaving behind joint debts (for example, a joint mortgage), then the debt becomes your responsibility, and you are expected to continue making repayments. If you are unable to repay these debts, it is recommended that you contact a debt counsellor who can advise you.

Part 2

Who pays off debts after someone dies?

Whoever is acting as the executor or administrator of an estate is responsible for paying off debts after someone dies. They can only use money from the estate and are never expected to pay off debts using their own money. If there is not enough money in the estate to pay off the debt in full, property may need to be sold to make up the rest of the sum.

Part 3

How to pay off debts if you are the executor or administrator

Two of the main responsibilities of an executor or administrator are arranging and holding a funeral and handling the probate process. Before you begin paying off debts, ensure you have set aside money for a funeral and for the probate application.

After this, you should start speaking to the relevant institutions and organisations who are owed money from your loved one’s estate. Each organisation can tell you exactly how much they are owed so that you can make a list of debts to pay off.

Before paying the debts, you should check whether your loved one had life insurance. You might find that their life insurance policies include full repayment of the mortgage, for example.

Next, you should apply for probate and begin administering the estate. This includes closing down bank accounts, collecting funds, and selling or transferring property. If you think you might need help with this step of the process, Kwil offers a grant-only probate service or full estate administration service that may interest you.

Finally, you can pay off any outstanding debts. As a rule, you should pay off mortgages and secured loans first, followed by priority debts such as council and income tax, and finally unsecured debts such as utility bills and credit card debts. You should ensure that all debts have been paid in full before you start transferring assets to the beneficiaries of the will.