Can you inherit debt?
As a parent, when you die and leave debt behind, debt collectors can attempt to coerce your children into paying your debt. However, this is not legal. Your children have no obligation to pay your debt.
This debt can be medical bills, personal loans, credit cards, vehicle loans, or a mortgage.
When you die, your debt will be paid by your estate. If there is not enough money in your estate account, your debt will be written off. However, if your children co-signed for your debt, they will be responsible for it.
When the executor is winding up your estate, they will pay your debt first before distributing your assets to your beneficiaries. Sometimes they will start paying the most important debt and proceed to the least important. If there is not enough money from your estate to pay off your all your debt, the remaining debt will be written off.
If you didn’t leave an estate, there will be no need to pay the debt, and it will be written off.
What if you’ve got an unpaid mortgage?
Mortgages are treated quite differently. If your children inherit the house, they can make an application to take over the payments of your mortgage. If they don’t see any value in keeping the house, they can sell it. Y
our children will not be required to pay off the mortgage immediately, but they can make monthly payments as you would. If they can’t afford to make the payments, the house will need to be sold to someone who can.
The same principle applies to your car. If the beneficiaries cannot afford to continue with the repayments, the car will be sold at an auction to cover the remainder of the debt.
If you had life insurance, the beneficiaries can use the money from the insurance to pay off your mortgage and car.
Don’t forget your credit life cover
Your credit life cover can also pay off your debt balance when you die. When you take up debt, your credit provider will also offer you credit life cover. This cover helps you pay off your debt when you lose your income due to retrenchment, disability, or death. For most accounts you will have credit life cover. The people you leave behind must submit all the necessary documents, including your death certificate to your credit provider, so that your debt can be paid off.