Death and money problems are two things nobody wants to talk about over the family dinner table, yet getting a handle on your debts sooner rather than later can help your loved ones look forward to a more stable financial future when you’re gone, as Jane Clack, money adviser at free national debt service PayPlan explains…
Like it or not, there comes a time when we all have to face up to our own mortality and the legacy we leave our family. While most of us want to live well into old age, with the kids grown up and settled, the mortgage paid off and plenty left in the bank, sadly there are no guarantees. Your family may need financial support from their inheritance after your death – however, they can’t rely on it if you still have substantial debts.
Many people believe that your debts die with you. However, in reality, any outstanding payments towards debts are taken from your estate, which includes current accounts, savings, life insurance policies, property and possessions. Creditors take priority over anyone in your will, which means once the debts have been cleared, there may be little left for family members.
Chances are you’ll hold a joint mortgage with your partner, along with unsecured loans and credit cards in both of your names. In the event of your death, the other person normally becomes liable for these repayments. These debts might have been manageable as a couple, but if your partner experiences a significant drop in income after your death, they may struggle to settle them.
It’s also worth remembering that your family is not liable to settle your debts unless there is a joint financial agreement in place. As long as they inform the creditors about your death, repayments come from your estate until there is nothing left and they are written off.
Still, it makes sense to pay your debts now rather than letting them escalate and leaving those you love with the burden of dealing with creditors. Plucking up the courage to talk about your financial problems is never easy, but free professional and non-judgmental advice provided by organisations such as PayPlan can guide you through your options.
Another consideration is a life insurance and/or critical illness policy to make sure the mortgage is paid off in full should the worst happen. It’s also worth speaking to your employer about company pension and death-in-service arrangements, as your surviving partner may be eligible for a lump sum. Finally, you should try to have an honest conversation with your spouse about how their financial situation might change too, and what they could be entitled to.
Once you’ve got a stronger financial footing, with your debts under control, you can look forward to a bright future with plenty of quality time with the family.
For free support on tackling your debts, visit PayPlan.