Unfortunately, debt does not simply dissolve after you die. In fact, everything you have left to your name after you pass could be used to settle outstanding debt. What’s worse, in addition to mourning your passing, your loved ones may be faced with paying your outstanding debt if you have not taken the necessary steps to protect them.
Although it’s always safer to avoid excessive debt, if you have it, it’s extremely important that you understand what happens to it after you die and how it will affect your dependents and anyone else who acted as a surety. This is why personal financial planning is so important.
Here is what could happen to your debt after your death.
If you have a will in place, your nominated executor will be appointed to manage your estate. This means that they will find whatever assets you have in your name to be used to pay off your debt. Whatever is left over after your debt is fully settled will then be distributed among your beneficiaries as per your will. If your debt outweighs your assets, there will be nothing left for your beneficiaries to inherit.
It will need to be determined if your debt is secured or unsecured. Secured debts are debts that are secured against particular assets. What this means is that the bank can take certain property (immovable and moveable) to recover the outstanding debt, should you stop making payments. If the debt is unsecured, the bank is unable to take assets as collateral. However, the bank may apply for a court order which allows them to take anything valuable and resell it to pay off the debt.
If your debt is shared with someone else, or if someone has signed surety on your credit, it may become their responsibility to settle your remaining portion of the outstanding debt. However, it’s likely that your assets will first be liquidated to settle your portion of the debt. If your assets do not fully cover the amount of debt you left behind, the other account holder or person who signed surety will be liable to pay the remaining debt.
Debt management is an important part of personal financial planning. With the right strategies in place, our financial advisors can help you effectively reduce your bad debt which ultimately opens more opportunity for you to make your money work for you both now and in the future. Bad debt is a major obstacle to achieving financial freedom.
We offer a wide range of financial services. Speak to us to find out how we can help you get rid of debt and invest in your future instead.
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