Debt after death?

[HFM]

Hi,

What happens to debt when you die? I'm living with my parents in their house, and am currently in debt to the bank (overdraft). If I die, will my parents have to pay my debt, or does the bank write it off?

Please can anyone help. Thanks.

[Buenchico]

When you die your debts are paid out of your estate. Here's an example:

You owe �1000
You've got �500 in a savings account.
Your car and other possessions can be sold for �3000.
So your estate (before paying off your debt) is �3500, but it's reduced to �2500 by paying off the debt. So the beneficiaries of your will (or those who benefit under the intestacy rules if you don't leave a will) will receive a total of �2500.

Although the value of your estate can be reduced by debts it can never 'go negative'. (i.e. you can't leave a debt to be paid by others). Let's take the figures as above, but with a debt of �5000, instead of �1000. The �500 in your savings account, and the money received from selling your car and possessions, will pay off �3500 of the debt (leaving nothing for the nominal beneficiaries of your will, or for anyone else) but the bank will have to write off the remaining �1500.

Chris

[padanarm]

What a cheery thought. Surely your debt is taken from your estate when you die?

If your estate can't meet your debts then they can't be met. A daughter's debts don't pass to the parents - unless the parents acted as guarantor for the debt. The only other exception would be where a loan was secured against property.

It's better to owe money when you die. It means more people will be at the funeral - just to make sure.

[HFM]

Ok, thanks for both of your comments... I have nothing worth anything, my debt is 'small' by comparison, of around �800. When I die, does this money owed get written off instantly? Sorry to reiterate but I want to make sure I'm understanding fully. My parents are not my guarantors, but they have their own possessions; house, car, etc. Because I am living with them, does this have any impact?

Many thanks

[Buenchico]

In the event of your death, the bank might (quite reasonably) make enquiries to check that you've not left any estate. (So they might contact your parents but your parents would be wrong to regard any letter as a demand for payment). Once the bank have established that there's no money for them to call upon they'd have no choice other than to write off the debt.

Unless your parents owed you money at the time of your death (which would then count as part of your estate) the bank can't get a penny from your parents.

Chris

[padanarm]

This is an unusual question, as you'll appreciate.

If you've got money worries, speak to someone from Citizens Advice. They'll help you, whatever your age and however you've got into these circmstances.

If you've got a problem, better to sort it out now.

[123everton]

�800 is a tiny amount of money to owe.
You're not planning on going somewhere are you?
Wouldn't be worth the journey for that (any) amount.
Remember, if you lose your wealth, then you've lost nothing, if you lose your health, then you've lost something but if you lose your character then you've lost everything.