Common questions about debt and death
Am I now responsible for paying their debt?
One of the natural questions asked about the debt left behind by a loved one is whether the beneficiaries will have to cover it now that they’ve passed away. The short answer is no; you will not inherit the debt or be responsible for paying it. The exception is if you shared a debt with your loved one (i.e., a joint credit card, loan, mortgage or line of credit) — in this case, the full amount of any outstanding debt falls to you.
However, outstanding debt doesn’t just disappear, either. While beneficiaries do not inherit the debt, the debt stays with the estate, so before any inheritance is paid out, the estate assets must first be used to pay outstanding debts.
What if there is more debt than the estate is worth?
If someone dies with no estate, generally, debts remain unpaid. If the estate has some assets, but the value isn’t large enough to cover the outstanding debts, there is a general order of priority. Certain debtors, such as the Government of Canada, have a legal right of payment over others. And if the estate can only cover partial debts, then a portion of debts will be paid up to the available funds.
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