Having debt can be stressful, even if you only owe a small amount of money. So just imagine how awful it can be when you owe more money than you can keep track of.
Sometimes it may feel like you will never be able to pay off your debts, especially when you start to consider just how short life is. And if your biggest fear is not paying off your debts before it’s your time to move on, then chances are you have children you are thinking about.
After all, if everything that is yours will one day be inherited by your children, does this mean that they will also inherit your debt?
Down below we have gathered all the information you need to know about the nature of your debt and how it could affect your children. So that you may find the answers you seek to your many burning questions.
The short answer to this question is no, your children cannot inherit your debt. People can only inherit the debt of deceased loved ones if they are listed on the credit agreement.
This means that the debt will become yours to pay – but this is a rare situation. However, this also does not mean that your debt will not affect your children after you have died.
If your child is the executor of your will, then part of their role will involve organizing your outstanding debts and making sure that they have been paid.
Of course, your children will not be expected to pay for these debts using their own money and possessions – for the debt is yours and not theirs.
Unfortunately, this does mean that any outstanding debts that you have will have to be paid off using assets from your own estate.
When a person passes away, the term ‘estate’ is used to refer to any money or assets that the deceased person has left behind.
For example, if you were to pass away this minute then your house, car, possessions and money would all fall under the definition of your estate. If you have any outstanding debts when you die, then they will have to be paid off using whatever is available in your estate.
On the surface, this may sound like the perfect solution to your problems. For when you have passed away, you won’t be around to cherish your worldly possessions. So why not let your children use them to pay off your outstanding debts?
The same applies to any money you may have left behind. After all, you won’t be able to spend any of it once you have passed away.
However, using your estate to pay off outstanding debts comes with some negative effects. Ones that could greatly affect your children and the inheritance you have left them.
If your children are forced to pay off any debts using assets from your estate, then they are allowing anything you have left behind to be used as payment. Including whatever legacy or inheritance you have assigned to them.
This means your children could pay off your debts but walk away with a smaller inheritance than you originally intended.
After you have passed away, there are certain debts that your children should consider paying off first. We have detailed these debts down below in the order of their importance.
– Funeral Costs: The most important, these will have to be paid upfront.
– Property Debts: This includes your mortgage and any other loans taken against your property.
– Solicitor Wage: Your children may need to invest in a solicitor to help them organize your debts and paperwork.
– Unsecured Debts: This includes debts such as your Council Tax, credit cards and utility bills.
If you’re beginning to worry about how your debts may affect your children’s perception of you, then there are some things you can do to help.
Remember that your children will already be emotional and scared at having lost a parent, so why not ease their stress when it comes to organizing your various debts and assets?
Taking out a life insurance policy can be a great help to your loved ones, as it will provide them with funds to deal with the aftermath of your death.
Although life insurance doesn’t fall under the definition of your estate, it can be used by your children to pay funeral costs and even outstanding debts. And this can really help them during this difficult time.
If your children are the executors of your will, then they should always check to see if you have taken out any life insurance.
This may sound like a strange suggestion, but it is arguably the most effective. If you are concerned about your outstanding debts, then keep a record of everything that you owe.
You can do this by filing away any legal paperwork, such as bank statements or bills. Keep track of everything and make it easily accessible for your children when you die. This will help to make the process easier for them, reducing their stress.