Some people are of the notion that when one passes on, their debt immediately gets cancelled or written off. As nice as that may sound to family members who are left behind when their provider leaves this earth, this is not entirely true.
The positive thing though is that no family member is expected to take over the deceased’s debt if their estate cannot fully cover his/her debt, unless the debt occurs jointly, or the family member was married to the deceased in community of property.
Below is more explanation from Debt Rescue on what the law says about the debt of a deceased.
The above-mentioned information site shares that when we pass away, we may leave behind more than just memories and a lifetime of accomplishments; we might also leave a trail of debt. But, if you think those debts vanish into thin air, well, it’s time for a reality check.
Planning for the end is more than just having a will. It’s also about wrapping up our financial loose ends so our loved ones don’t have to.
Appointing an executor is always a good idea. Debt Rescue adds that executors aren’t just caretakers; they are detectives too, uncovering all the deceased’s assets. From properties and bank accounts to investments, and yes, even their beloved porcelain cat collection.
The executor needs to pay off any outstanding debts and taxes. In South Africa, this also means filing the final tax return and settling any estate duty due to the taxman and creditors.
After debts and taxes are cleared, the executor can distribute the remaining assets as directed by the will. Through it all, the executor must keep beneficiaries informed.
But things can get a bit tricky: if your debts exceed the value of your assets, you’re said to be ‘insolvent.’ In this case, your entire estate is used to pay off the debt, and your heirs may not inherit anything.
Also see: Tips for planting the money tree