Will my debt be passed on to my children?

^{By Bromwich+Smith Staff | 711 words | Reading Time: 3 minutes and 33 seconds | Date: 2022/08/02}

We often think about debt in the moment, what can I afford to pay today, will I be able to manage my debts this month, will I have enough money to pay all of my creditors this paycheque. What we might not think about is what happens to our debt when we die.

Approximately 55% of Canadians have a will drawn up which is a great start. If you do not have a will, or it does not reflect any updates in your life ( children, spouse, house, or new assets) you may consider getting your will finalized. While it is a scary idea, planning for your death it will help those you leave behind and set them up for their future. We suggest our partners at LitCo Law if you do not currently have a lawyer.

Will My debt go away?

Typically debt will not be forgiven and go away in the case that you die with debt. If any of your loans, or credit has a co-signer- for example a spouse, the debt will be transferred to them. If there is no co signer on the debt, then the estate will be responsible. Meaning, any insurance policies or assets will first be divided to pay off your debt, before the remaining amount goes to your beneficiaries. If there are no assets to be sold to pay off your creditors, your beneficiaries will not inherit your debt and the debts will be forgiven.

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My spouses Creditors keep calling

What happens if your spouse passes and you are not a co signer, or linked to their credit cards? You are not legally obligated to pay their debt. Creditors may call you and try to convince you otherwise. These debts are considered uncollectable, and while they may try to get you to pay know that you are not responsible to pay. You can file a complaint if you believe you are being harassed.

How Should I set my Beneficiaries up for financial success?

1. Have an updated Will. This will help layout where your assets go, and will help the executors of your will understand what debt you have.
2. Try to avoid co signing loans. If you have a co- signer, they will be accountable for your debt. If you are eligible for a loan without a co-signer, you may save your loved ones from the financial burden. Consider a term life insurance policy, and by doing so debts will not be passed on to the co-signer.
3. Talk to a debt relief specialist to get out of debt before your death. If you are concerned about the amount of debt you currently have and do not want to pass it on to your loved ones, get on top of your debt now.

My loved one has passed, how do I avoid paying their debt?

1. If a loved one has passed and there is an outstanding debt you will need to send a copy of the death certificate to each creditor. This will give them the information they need to clear the debt from their records. If they continue to call you, you may need to contact a consumer protection agency to file an official complaint.
2. Creditors can make a claim against the estate. Hold back money from the estate to cover the bills, or ensure all bills and taxes are paid prior to the estate being divided.
3. When in doubt, contact a lawyer. The loss of a loved one is often an emotional time as it is and the stress of creditor calls, and confusing legal descriptions or court issued documents is trying. A legal professional can ensure you are protecting yourself while honouring your loved one.

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While you are mourning the passing of a loved one, it is important to remember your own financial situation. Do not put yourself into debt to pay for their debt. Take the time you need to grief your loved one before taking on the legal obligations of the estate.

Bromwich+Smith has a number of debt relief strategies to help you regain control of your finances and get your life back on track. Reach out today for a free, confidential, no obligation consultation. Bromwich+Smith’s Debt Relief Specialists are available by phone at 1.855.884.9243, or request a call back at contact us page. We want to see you flourish!