Millennials are responsible for killing so many things (canned tuna, Christmas traditions, lunch, to name a few), that it’s no surprise we’re so relaxed making jokes about death.
Take a browse through Twitter and you’ll find memes of the Roll Safe guy tapping his temple to the idea that you can’t pay off student loans if you’re dead, jokes about responding to the threat of death with ‘well, hold on a minute’, and tweets centering around the concept of getting hit by a car so debts will disappear.
We’re kidding, obviously. Death is funny.
But all our jokes do raise an interesting question. What actually happens to our debt when we die? Does our debt really die with us?
Short answer: sort of.
What happens to your debt if you die?
When someone dies, any outstanding debt they have becomes a liability on their estate, rather than just evaporating into thin air.
The debts then become the responsibility of the executor of the estate (whoever’s responsible for all your possessions and money) or, if no will has been left, the administrator.
This person is then responsible for paying off any outstanding debt from the estate – so, any money the person had lying around, money that could be made by selling a property, and so on.
If a deceased person’s estate simply doesn’t have enough money or things to pay off the debts, that’s when you get into debt dying with them.
In this case, any debts will be paid in priority order until the money and assets run out. Once everything runs out, remaining debts are likely to just be written off. Relatives won’t have to pay off any outstanding debts in this case, unless they acted as a guarantor or co-signatory of the debt.
So if you had a joint mortgage, loan, or an overdraft on a joint account, the other person would need to pay it back if you died. If you acted alone on that loan, your wife, kids, or family members wouldn’t need to use their own money to pay it off.
That doesn’t mean relatives and spouses won’t be affected money-wise, though. Obviously, if you die with a load of debt that will prevent you from leaving much in the way of inheritance.
And if someone were to leave their mortgaged house to someone else in the will, that person would need to continue to pay off the mortgage.
But the good news is that if you die, creditors are not allowed to chase down family members to pay back money you owed, no matter how big the debt may be.
When it comes to student loans, that specific debt does die with you (in the UK, at least).
When someone dies the Student Loans Company will cancel their student loan, as long as someone lets SLC know they have died and provides evidence (a death certificate) and the person’s customer reference number.
That’s the case among some student lenders in the US, but not all.
How to sort out the debt of someone who has died
Sorting out someone’s debt after they die can be a stressful and time-consuming experience, and it’s often worth seeking the advice of a solicitor.
Nick Hill, Money Expert from the Money and Pensions Services tells Metro.co.uk: ‘Dealing with the bereavement of a loved one is an incredibly difficult thing to go through even without the extra shock of finding out about any debts.
‘You’re going to need time to deal with both the emotional and administrative sides of things so make sure that you inform creditors of the bereavement as soon as possible.
‘Tell them you’re going through the legal process of dealing with the person’s estate and ask them for a letter or statement showing the outstanding balance on the debt. They should normally be sympathetic and give the executor or administrator of the estate time to sort out the debts if they are kept updated.
‘The good news is that there are places you can go to for help. The Money Advice Service website has a step by step guide and their free money guidance helpline is available on 0800 138 7777.’
The first step of managing someone’s finances after their debt is working out what they owe, what they have, and whether they have any insurance specifically to pay off any outstanding debts.
A life assurance policy might repay a mortgage, personal protection insurance can cover loans and credit cards, and some pensions and employers will provide a lump sum of money as a ‘death in service’ payment.
You would need to go through papers and financial statements and make a list of everything owed, as well as working out if any debts are joint or have a guarantor, who would be liable for any debts that cannot be paid by the estate.
Then it’s time to let creditors know that the person has died, so that they won’t be pestering anyone for payments. You can also ask for a statement to tell you the outstanding balance on the debt.
If there is enough money in the person’s estate to pay off debts, they have to be paid in priority order: first secured debts such as mortgage repayments, then priority debts such as income tax and council tax, then unsecured debts including utility bills and credit cards.
If you’re concerned about debt or dealing with the finances of someone who has died, there are services available to help. Get in touch with the Money Advice Service or StepChange to get further advice.
Debt Month
This article is part of a month-long focus in November all about debt.
Scary word, we know, but we're hoping if we tackle this head on we'll be able to reduce the shame around money struggles and help everyone improve their understanding of their finances.
Throughout November we'll be publishing first-person accounts of debt, features, advice, and explainers. You can read everything from the month on the Debt Month tag.
If you have a story to share, a topic you want us to cover, or a question that needs answering, get in touch at MetroLifestyleTeam@Metro.co.uk.
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source https://metro.co.uk/2019/11/06/happens-debt-die-11048739/
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