Can I Inherit Debt?

The short answer is, no.

It is a common misconception that when a person dies, that person’s family inherits his or her debt. Beneficiaries are relieved to hear that this is not the case; generally speaking, you do not “inherit” debt unless you previously accepted responsibility for it.

So, what does happen to debt when a person dies?

The answer to this question depends on who owes the debt, who the debt is owed to, and whether there is any money in the Estate to pay those debts.

A person’s “Estate” is all of the property that person owns, in his or her name alone, at the date of his or her death. The beneficiaries of an Estate are the individuals who are entitled to receive the deceased person’s Estate. Debts belonging solely to a deceased person are paid for by the deceased’s estate. The beneficiaries are not obligated to pay the deceased’s debts; however, the beneficiaries are only entitled to receive what is left of a deceased’s Estate after the deceased’s debts have been paid.

If a debt is “joint” between two people and one person dies, the survivor will be responsible for paying the balance owing. For example, if one joint owner of a credit card passes away, the surviving joint owner will be personally responsible for the outstanding balance. The same will be true for debts that were co-signed, or guaranteed, by someone else. If you signed as a guarantor on your child’s loan, and that child subsequently dies, you will be responsible for the entire debt because you previously accepted responsibility for it.

Debt that is held solely in the name of a deceased person is not the responsibility of anyone other than the deceased. Debt owed by a deceased becomes a debt of their Estate, and their Estate (under the direction of the personal representative) must pay those debts. The personal representative of an Estate has the onus to determine the deceased’s debts, and ensure that they are paid from the deceased’s assets.

But, what happens if there is not enough money in the Estate to pay the debts?

The deceased’s family is still not responsible for the deceased’s debts. If there is not enough money to pay those debts from the deceased’s property, creditors will be forced to write off some or all of the debt as “uncollectable”. They do not have to right to go after the deceased’s family.

If you are the family or personal representative of a deceased person and you suspect that the deceased’s debts outweigh their assets it is important to seek professional assistance early on in the process so that you can determine the best course of action.