In British Columbia, Canada, the handling of a deceased person’s debts follows a similar process, with specific legal considerations under provincial law. Here’s how it works:
- Responsibility for Paying Debts
The executor (or administrator if there is no will) is responsible for managing the deceased’s debts. They must ensure that all liabilities are settled from the estate before distributing any assets to heirs or beneficiaries. If the estate lacks sufficient funds to cover all debts, creditors may not receive full payment.
- Identifying Debts
The executor’s first task is to identify all debts of the deceased, which may include credit card balances, mortgages, loans, and taxes. This involves reviewing financial records to compile a comprehensive list of what is owed.
- Paying Debts
Debts must be paid from the estate’s assets in a specific order of priority:- Funeral and Administration Costs: These are paid first, covering funeral expenses and the costs associated with administering the estate.
- Secured Debts: Mortgages or car loans are next, often necessitating the sale of the secured assets (e.g., a house or vehicle).
- Unsecured Debts: These include credit card bills or medical debts and are paid after secured debts but before any distribution to beneficiaries.
- Taxes: Any outstanding tax obligations are settled last.
- Insolvent Estate
If the estate is insolvent, meaning it cannot cover all debts, payments are made according to the priority order. Lower-priority debts, such as credit card debts, may remain unpaid if funds are insufficient. Family members are not responsible for the deceased’s debts unless they co-signed or guaranteed any loans.
- Joint Debts
For joint debts, such as a mortgage or credit card with a co-signer, the surviving party remains liable for the debt. The deceased’s portion of the debt is addressed through the estate.
The executor must carefully manage the estate’s assets to settle all debts in the correct order of priority. If the estate is insolvent, not all debts may be paid, but family members are generally not liable unless they have co-signed. It is crucial for executors to handle this process before distributing any assets to heirs.
Whether you are preparing your will to indicate debt management or an executor needing to clear out debts properly, contact us at Northam Law so that we help provide counsel to aid you in moving toward the right direction.
