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Handling the Debt of a Loved One Before or After They’ve Passed

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Managing a loved one's debts can be difficult.

Losing a loved one is always difficult, and it can be even more difficult when you have to handle their finances as their Power of Attorney (POA) or Executor of the estate.   Wills and Estates are formalized through an Attorney. Both POA and Executor roles are comprised of people entrusted with fulfilling the requests of the loved one.  The Executor performs the duties of executing the will once the loved one is deceased. Often the POA is also named as the Executor.  If not, the POA will be most helpful to the Executor in relation to estate information such as the location of documents, passwords, bank accounts, credit cards, investment contacts, property documents, for example, as well as the list of debts and creditors.  The list of debts may include the utility bills (water, heat, telephone, cable for example) as well as subscriptions, taxes (personal and property), credit cards, loans, mortgages, etc.

The executor’s role will be to roll up/close out the estate.  This will include paying all debts out of the estate.

What is an Executor of an Estate?

The estate is all of the assets and liabilities a person has under their name. The executor is a person responsible for managing the estate when the owner of the estate passes away, as per the directions of the deceased’s will and the legal expectations of the roll. 

More often than not, executors are family members or close friends, but executors can also be lawyers hired to either manage the estate or be a paid resource to the executor as needed. If you refuse to be the executor, the responsibility will pass to an alternative named in the will. If there is no other alternative executor, the estate will be handled by the laws and regulations of the province or territory in which the deceased lived.

In Alberta, this person will be determined by the Wills & Succession Act. However, this process has many different avenues depending on the deceased’s particular circumstance. As a general rule, the estate will either be managed by a surviving spouse or next-of-kin.

Once the executor is named, they will then need to pursue a grant of probate to confirm the will’s validity and the validity of the executor. If the will also requires land management, the executor will also need a grant from the Alberta Land Titles Office before they can transfer any real estate.

But before an Executor can carry out any duties they must have formal copies of the Certificate of Death to present to banks, trusts, pension organizations etc plus proof of executor authority. 

Let our team help you manage your loved one's debts.

Managing Debt as an Executor 

All outstanding debts (liabilities) of a loved one need to be paid, including income tax, before any beneficiaries are paid as per the will instructions. If the executor fails to pay these debts before paying beneficiaries, they will be held liable for paying these debts.

It is not unusual for executors or next of kin, prior to the death, or after, to call us about the estate liquidation and how best to unravel indebtedness.  In numerous instances we are called to the bedside to advise and consult.  If debt remains after the entire estate is financially exhausted the executor will not be held responsible but must make an accounting.

Can I Inherit Debt?

A common question asked when a loved one passes away is whether or not they will inherit the debt of the deceased. Fortunately, the short answer is no. No single person is responsible for paying off a deceased loved one’s debts as these will be potentially paid from the estate except where a co-signatory is attached or there are liens on the property or……..  If the estate does not have enough assets to pay off all debts seek advice.

The 2 most common situations where debts may be co-shared include shared credit card accounts and co-signed loans.

Having a Supplementary Credit Card

If there is a shared credit card with the deceased, that person will be equally responsible for paying off/managing that credit card debt.  However, the Executor may arrange for the estate to pay off the debt and discontinue the card, subject to the funds owed versus the estate worth and whether or not the secondary signatory was the major spender aside from the purchased needs of the deceased. 

Being a Co-Signer on a Loan 

Co-signed loans can be a little complex depending on the loan, where the money was borrowed, and how much the loan was. In most cases, hopefully, the estate will cover the loan payment in full otherwise the co-signer will be responsible for payments to the loan.

Get Help Managing Your Debt Today

If you or a loved is not sure of how to make sense of a list of various assets and liabilities, please contact our team today. We can help provide meaningful strategies to help manage your financial situation to deal with debts.

Written by Arthur Waring

Arthur earned his Bachelor of Arts from the University of Western Ontario before earning a Bachelor of Commerce from the University of Windsor. During university, he also participated in a French immersion program in Trois Pistol, Quebec, and has been employed for several national firms over the years.

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