Does Debt Transfer to Family After Death?

Posted on 5 January 2015

Many people wonder what will happen to their debts when they pass on. Does debt transfer to family after death? Are your family members responsible to repay debt upon the death of a loved one? What happens to your debt after you die? Here are a few things you should know about what happens to your debt upon your death:

Your family is not responsible for your debt

Generally speaking, your family members do not hold responsibility for your debts upon your death. This is unless they have co-signed or personally guaranteed your debt, in which case there will be some responsibility involved. If unsure, it is best to reach out to an experienced Licensed Insolvency Trustee to discuss what to do if you are responsible for the debt of somebody who has died.

Mortgage debt is attached to your home

When it comes to debt specifically related to your mortgage, it is important to note that the debt is associated with your home, not you as an individual. This means that when you pass away, your mortgage will be paid by selling or refinancing the house – not by somebody else paying it off. Of course, if the mortgage is joint with another person, they will become responsible for making payments following your death.

Your family is not responsible for your credit cards

Does credit card debt transfer to family after death? In most instances, no. Both credit cards and loans will not automatically become your family’s responsibility. That is, unless they you have a personal guarantor for either credit card debt or loans. Typically, credit card debt or loans will be repaid from the assets of your estate. This will likely impact the inheritance that you leave behind to your loved ones.

RRSPs & TFSAs will go to a beneficiary

Regardless of whether there are debts outstanding on your Registered Retirement Savings Plan (RRSP) or Tax Free Savings Account (TFSA), they will go to the designated beneficiary after your death. This is instead of them going to your estate, unless your estate specifically is the beneficiary.

Tax debt can be a little more complicated

If you feel that settling your tax debt affairs following your death could mean there are significant tax implications, it is best to speak to a Licensed Insolvency Trustee to understand your financial options. They are experienced in all forms of debt relief, and can advise you as to estate planning and insurance policies.

Have more questions around how debt transfers to family after death? To discuss your options for debt relief, call Spergel at 310-4321, visit our nearest location for a free consultation, or complete our free assessment form online and one of our representatives will contact you directly.


Helpful starting information:

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