When someone dies, their debts become liabilities for their estate, where the executor or administrator is responsible for settling any remaining debts using the assets of the estate. But what is the situation if you are married? Can debts be inherited by a surviving spouse? We look at the issues.
When someone dies, their debts become liabilities for their estate, where the executor or administrator is responsible for settling any remaining debts using the assets of the estate. But what is the situation if you are married? Can debts be inherited by a surviving spouse? We look at the issues.
If you have a family law issue and you require legal advice to understand your options, contact specialist family law solicitor Parvien Akhtar. Parvien is an award-winning lawyer with 25 years of experience as a qualified solicitor, and has a proven track record of providing high-quality advice to her clients.
What happens to debts when a spouse dies?
If the debts are in the deceased’s sole name, they will not be owed by anyone else when they die, even if they are married or in a civil partnership. In this case, the debt becomes payable by the deceased person’s estate.
If the debts are joint, or someone has acted as a guarantor, then the surviving spouse and/or guarantor will be liable for these debts.
Joint debts
If you have taken out a loan, finance, or mortgage in joint names, then in most circumstances, the outstanding debt will pass in full to the surviving person named on the agreement.
In respect of a mortgage, the surviving spouse or registered civil partner must continue to pay the mortgage instalments, but is not required to pay off any debts in the deceased’s sole name.
If the couple holds the property as joint tenants, when one spouse or civil partner dies, the surviving spouse/civil partner will automatically receive the deceased’s share, and the entire property comes into their ownership.
If the property is held as tenants in common where the equity is owned in defined shares by two people, after the death of one party, their share passes according to the terms of their will, or if there is no will, via intestacy rules. The surviving spouse retains their agreed share.
What happens to energy bills after death?
If the energy bill was in the deceased’s sole name, any arrears should be paid by the deceased person’s estate. The surviving spouse is not personally liable for these debts unless the account was held jointly. If the account is subsequently transferred to the surviving spouse, they will become responsible for future energy bills from the date of transfer onward.
What happens to water bills after death?
If the water bill was in the deceased person’s sole name, any arrears should be paid by their estate. Any joint occupier of the property relating to the bill will be responsible for the ongoing bill and the billing name changed by the water company. If there are any arrears, the joint occupier will also be responsible for these. Water arrears are considered a non-priority debt because the supply cannot be disconnected if there is someone still living in the property.
What happens to council tax after death?
A spouse of the person who dies will be responsible for the ongoing bill, but can claim a 25% discount if they are the only adult living in the property. They will also be liable for any council tax arrears if they were living in the house, even if their name was not on the council tax bill. If the person was not named on the bill, the council will have to send a new bill in their name before they can recover any outstanding council tax. Council tax arrears are considered a priority debt; the council will want the ongoing council tax paid, plus an extra amount to clear the arrears.
What happens to hire purchase agreements after death?
Hire purchase or finance agreements are typically used to buy cars, but some shops sell household goods on hire purchase too. Typically, these goods do not belong to the person(s) named on the agreement until the final payment is made. You should check to see if there is an insurance policy that pays off the agreement if the person hiring the goods dies. If there is, the credit agreement may be paid off and the goods would then form part of the deceased’s estate.
If the hire purchase was in joint names, then the surviving spouse is liable for the whole debt and must maintain the payments.
What about credit debts?
Only a person who has signed the credit agreement can be held liable for credit debts such as credit cards, overdrafts, unsecured loans, and catalogues. Any money owed by the person who died can be recovered by the credit company from their estate. If the debts are in joint names or had a guarantor, the surviving person or guarantor will become solely liable for the outstanding sum.
If you were an additional cardholder of your deceased spouse’s credit card, they remain solely liable for how the account was run, and, as a result, as a surviving spouse, you will not be liable for any outstanding sums owed. Here, money to repay the debt would need to come from the deceased’s estate.
How do I protect myself against being liable for my husband/wife’s debt if they die?
As discussed, individuals are not automatically liable for their spouse’s debts. However, certain situations can create potential liability, so it is essential to take specific steps to protect yourself where you can.
- Keep your finances separate by maintaining individual bank accounts and credit arrangements. Avoid joint accounts or loans unless necessary, as joint accounts can make you liable for any overdrafts or loans associated with them.
- If you take out a joint loan or mortgage, you are both “jointly and severally liable,” meaning creditors can pursue either of you for the full amount. To avoid this, ensure any loans or credit agreements are solely in your spouse’s name if you do not wish to be liable.
- Avoid signing any agreement where you act as a guarantor for your spouse’s debt. If you agree to be a guarantor, you become liable for the debt if your spouse cannot pay including when they die.
- Consider a prenuptial or postnuptial agreement which can clarify how debts and assets are to be managed and separated during the marriage and in case of divorce.
- Stay informed about your spouse’s financial situation and seek legal advice if you’re concerned about potential liabilities. A solicitor can offer tailored advice based on your circumstances.
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