The thought of our loved ones passing away is not something anybody likes to dwell on. But there’s no escaping this reality of life and it is a deeply sad time.
When the worst does happen, these unfortunate events can at least be made easier when we know how to tidy up the person’s finances.
This blog should help you feel informed about what to do in the event of a death — managing the deceased’s credit report, and understanding how (and if) their debts should be passed on.
Why you should update the deceased’s credit report
We know this is probably not top of your list when you hear a friend or family member has passed away.
But if you’ve been tasked with handling their finances (this is usually called being the executor or administrator), it is important that you let Equifax*, Experian* and TransUnion* know that the person has died. This way, they can add a note to the person’s credit file.
You usually need to let them know in writing (by post). Remember to include a copy of the person’s death certificate, along with proof that you’re legally allowed to act on the person’s behalf. (For example, a legal document naming you as the executor or administrator).
Firstly, and unfortunately, there is a risk that your loved one’s name and credit information could be used fraudulently. But if you let *the three credit reference agencies know, then they can flag up any further activity.
Secondly, because these three agencies each have a credit file for the person who has died. They can help direct you to what credit accounts and agreements are open under their name.
What happens to the debt of a deceased person
When someone dies, any outstanding personal debts they had are usually deducted from the value of their “estate”. These will then be paid off by the executor.
The person’s estate is any money (including any insurance pay outs), shares and anything else they owned like property or land.
Requesting a credit report for the deceased can help you put together a list of any open accounts and credit agreements that are outstanding.
If the person’s estate doesn’t cover the value of their debts, their debts will usually be written off. There are exceptions when it comes to joint debts or debts with a consignatory or guarantor.
Different types of debt will need to be handled differently. So we’ll share some details of the most common types below.
If your partner has died, and you’re struggling to pay off joint debts, you’re not alone. Organisations including StepChange and The National Debtline can provide free help and advice.
Who is responsible for debt after death in the UK?
Can credit card debt be passed on after death?
If the person who passed away was married or in a civil partnership, it’s likely the surviving partner would be worried that the credit card debt of the deceased spouse/partner would pass onto them.
Luckily, this isn’t the case within the UK system unless it was a joint account.
Because although legally tying the knot joins you as a couple in many ways, it’s only when you take out financial agreements with joint responsibility that the transfer of debt would take effect.
What about overdraft debt?
In the event of death, overdraft debt is treated in a similar way to credit card debt. If an overdraft is taken out against the person’s individual current account, then the debt will be paid off from the value of their estate.
But if the person took out an overdraft against a joint account, the named partner/spouse would remain responsible for the balance. If you’re in this situation, you might be able to negotiate a more affordable repayment plan with your bank.
What about the shared home?
Our homes are important to us. So it’s common to worry about what might happen to a property when one of the owners dies. Particularly if there’s a mortgage outstanding. This is how mortgage debt is transferred the UK:
- If a couple own a home as beneficial joint tenants then the property automatically passes to the surviving partner. (Beneficial joint tenants are both legally entitled to equal shares of the value of the property.)
This means creditors can’t chase the surviving partner for the debts owed by the deceased and avoids them feeling forced to sell the home to pay these off.
- If the home is owned with the couple registered as tenants-in-law then that means each person only owns a share of the property. (These shares might not be equal, and each “tenant” is only entitled to their own share.)
In this instance, the deceased’s share will pass to the person named in their will. Their estate can be used to pay off any remaining debt after they die.
You can switch between these types of ownership while both partners are living.
What happens to a rent contract after death
If you live in a rented house with someone who dies, what happens to the tenancy depends on who was responsible for the contract before their death.
- If you were in a joint tenancy contract with someone who passed away, you’d become responsible for any rent arrears.
- If a death means that you have to take over a tenancy, you won’t inherit any arrears from before that point.
What debts are forgiven at death?
There are several types of debt. You might come across terms like “unsecured debt”, “secured debt”, “individual debt” and “joint debt.” If the deceased person’s estate doesn’t cover the value of their debts, there are some types of debt that can be forgiven.
If you’re dealing with a complicated estate, it might be worth seeking advice from a solicitor or probate specialist. But here’s an overview of some common debt terms and details of what types of debt might be forgiven at death.
What happens to individual debt when someone dies?
Individual debt is debt that is taken out in one person’s name. When someone dies, their relatives won’t usually be expected to pay off the deceased's individual debt. If the person’s estate doesn’t have enough money to pay off individual debts, then their debt will usually die with them.
What happens to joint debt when someone dies?
If the deceased borrowed money with one or more other people, that is called joint debt. Common examples of joint debt include joint mortgages, a joint overdraft or a joint credit card.
The surviving people named on the debt will usually be responsible for making repayments. But make sure you read the terms of the loan agreement. As explained above, there are different rules for different types of debt.
It’s also worth checking whether the deceased had an insurance policy. Some policies will cover repayments in the event of a death.
What happens to unsecured debt when someone dies?
Unsecured debt is debt that isn’t secured against the value of an item – like a vehicle – or property – such as a house. Where unsecured debt is individual debt, it will usually be forgiven if the deceased’s estate doesn’t cover repayments.
What happens to secured debt when someone dies?
Secured debt is debt that is secured against an item or a person’s property. That means that the lender can claim the value of the loan against something else, like the value of a house.
When someone dies, secured debts can be a bit more complicated to handle. If the deceased was the sole owner of the item or property a debt was secured against, that will need to be sold to repay the debt if money can’t be found elsewhere in their estate.
If the loan was secured against something that is jointly owned, then lenders cannot force the surviving owners to sell to settle the debt. But the surviving owner will be expected to take over repayments of the loan.
What support is available for people dealing with debt after death?
Losing a loved one is tough. And it can be particularly hard to approach money matters at this time. But most of us will experience the death of someone we care for in our lives. And many of us find ourselves responsible for managing debts after death.
The most important thing to remember is that there is help out there. So whether you need practical advice or emotional support, here are some of the resources that are available in the UK.
Cruse Bereavement Support
Cruse Bereavement Support is the UK’s leading bereavement charity. They can help you with grief counselling and practical advice. Head to their website, call them on 08088081677 or speak to someone via live chat.
Their guide, What to do after someone dies, provides step-by-step guidance on what to do in the weeks after a death.
The Money and Pensions Service (MaPS) provides free, impartial advice through MoneyHelper. They have a wide selection of guides on how to manage someone’s finances after their death.
StepChange provides free debt advice. You can call them Monday to Friday 8am to 8pm and Saturday 8am to 4pm on 08001381111 or use their online debt advice service 24 hours a day, 365 days a year.
Sometimes, we just need someone to talk to. And the Samaritans are always there to listen. You can call them for free at anytime on 116 123 or email them at firstname.lastname@example.org