How about debts when someone dies?

Children cannot inherit their parents’ debts. It is a basic rule that exists, but that does not mean that some financial problems may arise in the event of someone dying. There are a lot of things that can come into play that definitely affect the financial aspects of a death. Here we will go through some things that may be good to know.

Most people are probably aware that children, as I said, do not inherit their parents’ debts

family debt

But just because it is not automatic so that the debts just disappear. When someone dies, then the estate is left and there you have to clear up all the financial. Here all debts are set off against assets in various forms, both cash, shares and, for example, car or housing.

Maybe the children think they should inherit just because there are some assets left behind after the deceased. This does not necessarily have to be the case, since these assets must first be offset against any liabilities.

If there is a loan to the bank, this is repaid first

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It may even be that there are larger debts than there is money to pay them and then the estate may go bankrupt.

In the event of bankruptcy, certain receivables are prioritized and debts are paid as long as the money is sufficient. So it may very well be that there is no money to be obtained in the form of inheritance. This is not known for certain until the estate has been arranged for all the financial.


There are other problems too

One might think that a death doesn’t affect the financials so much for those who remain, but it’s not necessarily that simple.

  • If two people have mortgaged their home together and one of them dies, the bank has the right to demand that this part of the debt is either taken over by the remaining person or that the home is sold so that the debt can be repaid. This means that the one who is left has not so much choice. You either take the entire loan yourself or you have to consider moving.
  • As a private person, it can be difficult to get your money back if you lend to someone who has since passed away. This applies if you do not have a promissory note showing that there is a debt. Without the promissory note, you cannot claim to have your money back based on the law and then you can at best hope that the heir (s) who inherits are kind and pay back.
  • If you have applied for a loan together with the person who has died, ie been a co-borrower, you actually inherit the loan (in a way). As a co-borrower, you promise to be fully responsible for a loan if the other is unable to pay and therefore there is a risk that you will receive a large portion of the debt yourself.

    One should think long and well before deciding to take a loan with someone else in this way. If you do, there is always the risk that you will have the burden of repaying the loan.