Death and Debts Ontario
What Happens to a Person’s Debts When They Die?
A common inquiry is what occurs with a person’s debt in the event of death.
The good news is that debt is not an inherited expense which means that your debt does not pass down to your ancestors.
You are not liable for a person’s debt after they pass away unless, of course, you were the guarantor of that debt or were the cosigner – rendering it a joint debt.
In the event of a mortgage, typically amongst married couples, there is usually an agreement in place to account for a situation in which one of the debtors passes away.
This stipulates that in the event that one partner dies, the other will be solely responsible for paying out the remaining amount of the mortgage.
In ideal situations, there will be insurance arrangements in place to assist the surviving spouse with these payments.
In terms of the individual debt of the deceased, the process is for lending parties to go through the estate arrangements to gain payment for the loan amounts owing.
If the deceased left assets at the time of debt, the executor of the estate is in charge of ensuring that any debts are paid out from the proceeds of the estate of the deceased.
Generally speaking, all creditors must be told of the death of the person and typically require a death certificate.
It is up to the executor to ensure that accounts are responsibly and properly closed.
This must occur before distribution of the assets of the deceased.
Once all liabilities are taken care of, the funds can then be distributed to the beneficiaries of the estates.
In the event that the deceased leaves behind insufficient funds to pay off debt, they cannot be collected without there having been a guarantor or a joint debt arrangement.
Basically, you are responsible only for debt for which you signed on and thereby agreed to pay.
Always remain aware of any debt for which you are liable.