Debts & Death in Ontario
Another good question that can come up from time to time is what happens with one’s debt in death. You will be happy to note that debts can’t be inherited. So you can’t leave your debt to someone.
You can’t be liable for someone’s debt due to death, unless you are a joint debtor or you are a guarantor.
With a Mortgage, typically in a marriage, the married couple are both usually on the mortgage agreement, so in this case when one of the spouse’s die, then the other spouse will be legally responsible for the remainder of the mortgage. Hopefully there will be a proper insurance plan to help protect the other spouse in these situations.
For the debt of the individual that died, the proper procedure is for the lender to go through the estate to gain payment for the outstanding loans. If there are assets upon death, then the trustee/executor of the estate will be responsible for making sure that any loans/bills are paid via the proceeds of the deceased estate.
Typically, all creditors will need to be informed upon the death of the individual, and copy of the death certificate may be necessary. You will need to make sure that any accounts are then closed.
Before any assets can be distributed, the debts of the deceased will need to be dealt with first. Once that is done, then the assets can be passed on to the heirs.
If there are inadequate funds to pay off the deceased debts, the remaining debts will not be able to be collected, unless any of the debt has been guaranteed or any of the debts are joint.
It is important to remember that with debt, you are only responsible for debt that you have signed for, co-signed, have joint loan or you agreed to pay. It is very important to know exactly what debt you are responsible to pay for.