Have you wondered what happens to your debts once you die? You are not alone. Many people are unsure of how their debts will be dealt with when the time comes, and there is a myth that all debts die with you. While provisions to cover debts after death can be made, your loved ones could also be left with complex financial issues if you do not plan ahead. Here we look at all you need to know about dealing with debts after death.
Funeral Costs
The estate can cover funeral expenses as long as the deceased did not have a funeral plan. The amount you can use from the estate will depend on its total worth. Headstones are not included in funeral costs, so they may have to be dealt with separately.
Secured Loans and Mortgages
These types of debts will be collected from the asset they relate to. Any excess debt will become an unsecured creditor’s debt.
Probate Expenses
When dealing with an estate, you often find hidden costs creeping in. These include solicitors and estate agent fees and charges for letters and certificates. These will be taken from the estate before any other debt is paid.
Unsecured Creditors
When dealing with creditors, central and local government debts should be sorted first. These include:
- Utility bills
- Tax
- Bank loans
- Store cards
- Credit cards
- Interest on unsecured loans
- Deferred debts
It is the duty of the executor of the estate to deal with these. This may be a solicitor, a spouse or a family member appointed by the deceased. They are not liable for the debts, just for ensuring the money from the estate pays them where possible. This may mean selling a property or assets.
Owning a Home Together
If you own a home with the deceased and do not have enough money to cover outstanding debts, you may have to sell the property. This will depend on many factors, including the type of home or mortgage and other assets.
Making a Will
Making a will is the only way to ensure your estate is dealt with efficiently and per your wishes. It does not, however, change the fact that creditors and debts must be cleared from your estate before anyone benefits. There is no way of avoiding debts apart from clearing them before you pass away.
Contact Probate London for expert probate help on 0208 0171029.
