What happens to your debt when you die?

We are often asked this question from people who have been named as the Executor in a Will. They need to know if they are personally liable for any debts owed and what if there is not enough in the estate to cover them. What happens to your debt when you die?

Our friends at Ratehub have put together this article for us as a guest post.

What happens to your debt when you die? — Credit: 123rf

Debt is a part of life, and most Canadians are carrying around a significant amount, be it through credit cards, mortgages, and other lines of credit. With so many of us relying on credit, it’s no surprise that people often die with outstanding debts left unpaid.

It’s not always easy to talk about, but it’s important to make a plan for your debt ahead of time. Here’s a primer on what happens to debt when you die in Canada, which can help you get started.

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Canadian estate planning quiz

Explanation of the answers

This was a tough quiz covering estate planning in Canada. In this article we will provide you with some explanations for our answers.

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Probate in Canada – What it is, what it costs, how to reduce fees.

Must my Will go through probate?

To understand whether or not your Will needs to go through the probate process, you have to understand what happens after you have died.

Hopefully you have written a Last Will and Testament.

In your Will you name an Executor. This is the person that you entrust to gather and secure your assets. Your Executor then has to distribute the assets according to the instructions in your Will.

The Executor must collect up everything you own, keep it safe and secure until everything has been collected, and then pass these possessions and financial assets to your beneficiaries.

Probate — Copyright: aihumnoi / 123RF Stock Photo

Let us imagine a scenario.

Imagine your Executor going to your bank and presenting them with the Will. They explain to the bank that you have died and they show your Will to the cashier. The Will names your Executor. The person you have named shows their ID and they request the contents of the bank account. This person could even be one of your own children.

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Preparing a Last Will and Testament – top ten reasons why you need one now.

There have probably been a number of situations in your life when you have thought, “I should be preparing a Last Will and Testament.” And for some reason or another you have never actually taken the steps needed to update or create your Will. Don’t feel too embarrassed, because you are certainly not alone. In 2016 only 38 per cent of Canadian adults had signed a legally valid Will. Of those that did, one third were out of date.

Even if the data was restricted to Canadians over the age of 35, only 38 percent of those polled had a legal, up-to-date Will.

Canadian adults with a Last Will and Testament

Canadian adults over the age of 35 with a legal Last Will and Testament

This leaves a lot of people legally unprepared and their families unprotected or provided for.

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Write a Will in Canada: the complete guide to our Canadian Legal Wills

Learn to write a Will at LegalWills.ca

An increasing number of Canadians are turning to services like the one at LegalWills.ca to write a Will. But every day we received requests from our customers to clarify a term, or clause in their Will. Usually this request comes with an apology for their lack of understanding, and every time we have to give the reassurances that;

Although writing a Will is extremely important, it is not something that most of us do more than once of twice in a lifetime, so there is no reason to expect anybody to understand these terms.
A Will is such an important document, but the legal profession intentionally tries to make the document more complicated that it needs to be by using arcane language. There is absolutely no reason for a Will to say, “I give, bequeath and devise” when a simple “I give” would work. Or to say, “I nominate, constitute and appoint” when a simple “I appoint” would mean the same thing. But using arcane language is a way of pushing people into using the services of a legal professional because it seems beyond the capabilities of the layperson.
Nobody should be required to learn all of these terms in order to write a Will, and there are no clear concise guides that we could find.