When someone you love dies it is already a traumatic time and if you are worried you might inherit debt it is even more difficult. It is important to know that debts are paid off by a person’s estate. Their property, savings and investments can be used to meet their liabilities.
In England and Wales, it is unusual for someone to inherit debt, but there are a few exceptions. Here we talk about what happens when there isn’t enough money in an estate to pay off debts.
Can you inherit debt in certain circumstances?
If the debt is held only in the name of the person who has died it cannot usually be inherited. This type of debt is referred to as being in their ‘sole name’.
There are two exceptions to this. The first exception is if the debt was guaranteed by a third party. In this case, the third party becomes liable. The second exception is if the deceased person gifted money a short while before they died. If they did so, creditors might see it as a way to avoid paying debt and so they could pursue a claim.