When a person dies in the UK, their debts do not simply disappear. Instead, the responsibility for the debts falls to the deceased person's estate, which is made up of the assets they leave behind, such as property, money in bank accounts, and personal possessions. Here is a summary of what happens to debt when someone dies in the UK:
- Debts become the responsibility of the executors or administrators who deal with the deceased's estate.
- The debts must be paid off from the estate before any inheritance can be distributed to beneficiaries.
- If there is a will, the executor named in the will manages the debts and estate. If there is no will, an administrator is appointed by the court.
- The executor/administrator values the estate by determining the value of all assets and outstanding debts at the date of death.
- Debts include credit card bills, loans, unpaid taxes, mortgages, and other liabilities.
- If the estate does not have enough money to pay all debts, creditors may receive only a portion of what is owed, and the remaining debts may be written off.
- Family members or loved ones do not have to pay off the deceased's debts from their own money unless they were joint account holders or guarantors on the debts.
- Joint debts become the responsibility of the surviving joint account holders or guarantors.
- If there are no assets in the estate (no estate), the debts will generally not be passed on to surviving relatives who were not joint borrowers or guarantors.
- Executors must settle any inheritance tax with HMRC before distributing the remaining estate.
In summary, outstanding debts are paid from the deceased person's estate. If the estate lacks sufficient assets, debts may be written off. Surviving family members are not personally liable for the deceased's debts unless they were jointly responsible for them. The process involves applying for probate or letters of administration to legally manage the estate and settle debts before distributing any remaining assets to beneficiaries.
