Death planning guide: debts
Money Savings Expert Martin Lewis has compiled a checklist of 20 things you need to consider when planning for the financial well-being of your family (it’s on his website). The check-list includes tips on wills, inheritance tax, funerals and setting up power of attorney. Our last post addressed life insurance. This post looks at debts.
It's often said that "when you die, your debts die with you". But it's a little more complicated than that. When you die, anything you owe has to be paid first, before any assets can go to your beneficiaries.
So if you owe more than your assets are worth, your debts do die with you. Your beneficiaries will get nothing, but they won't be asked to pay the rest of the debt.
But if your inheritors are jointly responsible for the debts, your debts don't die with you as they'll have to make up the shortfall. If you're concerned about the impact this may have, contact Citizens Advice or consult a lawyer.
Consider taking out insurance if you've debt. The MSE Cheap Loan Insurance and Life Insurance guides are crammed with useful info that'll help you decide if you need cover to ensure debts are paid off on your death.