Can you inherit debt from your parents?

Are you struggling with debts, and worried that your partner or children might end up dealing with them after you’ve gone? Or maybe you’re worried about a parent or family member who is having money worries, and wondering whether you will inherit their debts.

Either way, you should be able to find the answers to all your questions in today’s blog. But if you think it’s time to get further advice, you can always get in touch with us.

Will my parents’ debt affect my credit score?

No! Your credit report is not affected by anyone else’s finances unless you have a financial association with them. You can find out more about what a financial association is, and what you can do about it, in our blog about the notice of disassociation[link].

If I die, do my debts die with me?

Not exactly. Your student loans do! But in most cases it’s a little more complicated. See below.

So can I inherit my parents’ debt?

No. When somebody passes away, their debts must be paid out of their estate. (‘Estate’ means whatever money, property or other assets they left behind.) These debts must be settled before the rest of the estate can be divided.

The executor of the deceased person’s will has to make sure all these debts are paid. If they didn’t leave a will, this responsibility falls to the administrator. Neither an executor nor an administrator will end up personally liable for a deceased person’s debts unless they’ve failed to deal with the estate properly. See below…

I’m the executor of someone’s will – what do I have to do if they die owing money?

The first step is to go through all their paperwork, including bank statements. This is so you can make sure you know exactly who they owed money to, and how much it is.

Of course, the deceased person may have had other debts that you’re not aware of. To avoid any risk of being held personally liable for these further down the line, it may be a good idea to publish a Deceased Estates Notice. You can do this in The Gazette, which is an ‘official journal of record’ used for this sort of notice. You could also speak to a solicitor for more advice.

Once you have a clear picture of the deceased person’s debts, get in touch with the organisations and people they owe money to and:

• Make them aware the person has died
• Ask for the outstanding balance of the debt
• Check whether a PPI (payment protection insurance) policy applied to the debt. Some or all of the remaining debt could be paid off if the deceased person had a policy which included life cover.
• Check for any joint debts. If another person was jointly responsible with the deceased person for any debts, they now have sole liability for this debt. This might be a mortgage, or a joint bank account with an overdraft. If this person will struggle as a result – for example, where a widowed partner is now liable for the entire mortgage – please encourage them to get expert debt advice right away.

The remaining debts need to be paid out from the estate, in a particular order.

1. Secured debts. These must be paid even before the funeral costs
2. Priority debts, e.g. any tax debts
3. Unsecured debts, like personal loans and credit cards.

What if the deceased person didn’t leave enough money to cover their debts?

In this case, you must pay off as much of the debts as you can – in the above priority order – with whatever funds are available. The creditors will then usually write off whatever debt remains; but if you find yourself in this situation it’s a good idea to speak to a probate solicitor.

If the deceased person didn’t leave behind any money or assets at all, then their individually held debts will usually be written off.

What about if they had life insurance?

A life insurance policy usually isn’t seen as part of a deceased person’s estate, because it’s paid out to a specific person. But if there is no named person to benefit from the policy, the executor may be able to use this money to pay off outstanding debts. Check the policy’s terms and conditions..

Will I have to pay nursing home fees from my parent’s estate?

Possibly. Have a look at Age UK’s information about nursing home fees and how they work.

I’m worried my children will have to deal with my debts after I’m gone – what can I do?

It’s understandable that you’d want to resolve your money worries as soon as you can. So it might be time to start thinking about getting some expert help with your debts.

The same applies if you’re finding it difficult to cope with a joint debt after a partner has died; or if you’re worried about someone who is. Whatever the situation, debt advisers have seen it all before – and there’s always something that can be done. Check out our debt solutions page to get an idea of your options.