Ever wondered what happens to your debts when you die? When a loved one passes away, families often need to account for expenses they likely would not foresee. At Pier Law, we often field questions relating to the debts peoples loved ones may have had when they passed away. Below is some information in relation to how estate debts are handled. Who is responsible for paying estate liabilities? Generally, who is responsible to handle any debts left by the deceased will depend on the type of the estate that is being administered, and whether the debts were jointly held with another person or not. If any debts or liabilities are owned jointly between the deceased and another person (a mortgage being the most common example), that debt will become the sole responsibility or the survivor. Where the debt is solely held by the deceased, the responsibility falls on the estate executor (if the deceased held a Will) or administrator (if the deceased held no Will) to ensure the debts are paid. When should the debts be paid? In the case of a mortgage, or any other debt the deceased held with another party, the debt (and therefore the responsibility for the debt) passes onto the survivor from the date the deceased passed away. This would usually continue to be paid on the same terms as the debt was paid during the lifetime of the deceased. If the debt is solely held by the deceased, the appointed executor of the deceased’s last Will, or the estate administrator if the deceased held no Will, first needs to uplift the assets of the estate before they can pay any debts. This is because the financial institutions in control of the deceased’s assets will ensure all accounts are “frozen” once they have been notified of the deceased’s passing, meaning nothing can be retrieved from the asset provider until they receive the information they require to release the funds. If the estate can be administered without a formal grant of Probate or Letters of Administration, the executor or next of kin can uplift the assets themselves and pay any debt owed by the estate, before distributing the balance of any funds to any estate beneficiaries. Where a formal grant from the court is required, debts can only be paid once the estate has funds, which usually is not until the estate has received a formal grant of Probate or Letters of Administration from the New Zealand High Court. All accounts/investments held by the deceased are unable to be accessed until they receive a certified copy of the formal grant for the estate. In cases where a formal grant of administration is required, the solicitors administering the estate will assist estate executors and administrators in ensuring any estate debts are paid. Are there any exceptions to when debts should be paid? In the case where there is a formal grant required for the estate, funeral invoices are the one debt that can be paid while the bank accounts for the deceased are frozen and before the grant has been formally received. Most funeral directors provide a discount for early payment of their invoices, so these can be paid as soon as they have been received to ensure the estate is not incurring unnecessary additional costs. If you have any questions in relation to debts, or estates in general, please feel free to contact our estates team. Written by Korey Glasson.
