Unfortunately, when we pass away, our debts don’t just automatically disappear. Depending on the type and amount of debt you have, your debts could eat into the inheritance you’ve worked so hard to leave your family. Even worse, if you have debts or loans in joint names, your loved ones could be left to carry the debt alone at a difficult time.
But there is good news. By planning ahead, you can ease the financial burden on your loved ones and leave them with happy memories, not money worries.
How are debts dealt with after death?
Usually your estate will be used to pay any outstanding debts. Your estate is any savings, superannuation or other assets that you leave behind. After your debts are paid, the remainder of your estate will be distributed to your beneficiaries. In the case where the total amount of debt is greater than the value of the estate, then the debt is usually written off. This scenario would mean that your beneficiaries would not receive any residual from the estate.
Loans in joint names or guaranteed by someone else
If you’ve taken out a loan along with someone else, they’ll be responsible for paying off what’s left of it once you pass away. This is also the case if someone is a guarantor for your loan.
How you can help prevent this
Thankfully, there are some simple steps you can take to help your loved ones deal with debts that remain after you’re gone. Start by making a list of your debts and ensuring you have enough super and other assets to cover them. It could also be worth considering final expenses insurance.
Final expenses insurance gives your family a valuable payout if you pass away. A final expenses payout is there for your family to use however they wish – including paying bills and other expenses you’ve left behind.
Best of all, if you have enough final expenses cover to take care of your bills, you can be confident that your assets will be left for your family, not frittered away on bills. So you can relax knowing your loved ones will be taken care of financially, even when you’re not around.
Find out more
To find out more about your insurance options, request an information pack or get a fast quote online.