You know the old saying – “you can’t take it with you when you go”. Well, in the case of your debts, you just might. In our latest article in The District Reporter, read all about what happens to your debts when you die.
We have found that many people believe that their family inherits their debts when they die. However, this is not the case.
When a person passes away the first thing for the executor to do is gather the details of the assets and liabilities which are in the deceased’s sole name. It is important to remember that assets in joint names, such as bank accounts and property, are not included. This is because jointly held assets automatically pass to the other person the deceased held the asset with.
In addition, superannuation is generally not covered by the terms of a will when a person passes away and is not available to pay debts. This is because superannuation is often either paid directly to beneficiaries in accordance with any binding beneficiary nominations that were completed by the deceased, or is distributed at the discretion of the superannuation trustee.
Similarly, life insurance will be paid to the policy holder or nominated beneficiaries, not the life insured, and does not form part of the deceased’s estate.
When a person passes away the assets held solely in their name can be used to pay for their funeral, wake, grave/cremation, headstone and any legal expenses in handling the administration of the estate.
It is only after these costs have been paid that the remaining assets are applied to any other outstanding debts.
If it is the case that there are no funds remaining to pay the debts then, as long as the debts are in the deceased’s sole name and there is no security held over another asset, the creditors will have no option but to wipe them.
We have seen many circumstances where wealthy and successful people have died with minimal assets held in their sole name and who have been able to have their credit cards and personal loans waived by the banks. Of course, each estate is different and it is important that you seek proper advice. As was always say – knowledge is power.
