You know that your loved one incurred some debts while they were still alive. The house is not paid up.  The car that is parked in the garage is still owed to the creditors.

So what happens to these debts after the death of your life partner or close family member?

You know that your loved one incurred some debts while they were still alive. The house is not paid up.  The car that is parked in the garage is still owed to the creditors.

So what happens to these debts after the death of your life partner or close family member?

According to Geoff Wylde, innovations manager at Intelligent Debt Group, when a person dies all assets and liabilities on date of death will be placed in an estate.  These assets can include the house, car, furniture and cash in the bank, while liabilities include all debts. During this process you can expect three outcomes:

Deceased’s assets cover the debt

The executor of the deceased’s estate will sell the assets and use the funds from the estate to settle any outstanding debt. The remainder of the deceased’s estate will be distributed to the dependents.

Debt will be cancelled

If the executor does not have enough assets and funds to use to settle the debt, it will be cancelled.  Debt collectors are not allowed to pursue family members for the outstanding amounts.

The person who shares the debt will inherit the debt

According to Wylde, the only time that someone else is liable for the debt is if the deceased had a bond (home loan) that was jointly held with another person, like their spouse.

Even in such cases, many bonds will have bond cover and many unsecured debts will have credit life insurance. These insurance policies will pay out the full outstanding balance of the debts when a death certificate is delivered to the relevant credit providers.

 What is the procedure for winding up a deceased estate?

According to the Deceased Estate Act, this is the procedure:

  • You, the surviving relative, must report the estate of the deceased to the Master of the High court within 14 days of death.
  • If the value of the estate exceeds R250 000, the Master must appoint an executor to administer the estate by issuing a Letter of Executorship. If the value is less than R 250 000, the Master issues a Letter of Authority.
  • The executor then opens an account from which the estate is administered.
  • The executor issues an advertisement in a Gazette and in newspapers in the district where the deceased used to reside at the time of death.  The advertisement is a notice that the account is open for inspection for all those who have claims against the deceased. This must happen within a period of 12 months.
  • The executor pays the creditors what is due to them and distribute the estate among the beneficiaries.

This article has been prepared for information purposes only and it does not constitute legal, financial, or medical advice. The publication, journalist, and companies or individuals providing commentary cannot be held liable in any way. Readers are advised to seek legal, financial, or medical advice where appropriate.