What happens to your debt when you die?

Your debts such as mortgages, credit card debts, personal or car loans, will still need to be paid once you die. 

If you have a valid will, the appointed executor of your estate will organise the payment of your debts. Generally, the executor of your will, can use any residual money to pay any debts such as a mortgage. However, if there is not enough money in your estate to pay the debts, your executor might have to sell your assets to cover these costs.  

If your loved ones are nominated in your will to legally inherit your property, then they may be able to take ownership of such property and take over the mortgage. Mortgages can also be paid from benefits received from a life insurance policy. 

Study and training support loans

If you had an accumulated HELP (Previously HECS), SSL, ABSTUDY SSL, TSL or SFSS debt at the time of your death, and your income exceeded the minimum repayment threshold, an assessment will be issued for the date of death tax return in which your executor will need to submit. This will then include a final compulsory repayment. After this, any remaining HELP, SSL, ABSTUDY SSL, TSL or SFSS debt is cancelled.

What order will my debts be paid in?

If your estate has sufficient funds to pay of your debts then they will be paid off in the following order in each state: 

However, the order in which the estate is applicable towards the discharge of debts and the incidence of rateability as between different properties within each class may be varied by a contrary or other intention within the Will. 

Joint Tenant Property

If you own a property with someone as a joint tenant, the surviving tenant or tenants will receive the whole property automatically by operation of law. 

This is because, property held in joint tenancy does not form part of the estate of a tenant who dies. Therefore, a joint tenant cannot pass this property onto a beneficiary in their will unless they have sole ownership of the property at the time of death. 

Will your family have to pay your debts if your estate cannot?

Your family could be liable for such debt if your property is in joint names with another, such as a husband or wife. Or if your debt is secured against property owned by someone else or someone else is a guarantor for such debt.1

If a beneficiary has been bequeathed an asset that was used to secure a debt, and the beneficiary wants to keep that asset, then the beneficiary must bear the burden of the debt.

This is however, subject to any intention stated in the will or another document that was made before your death. The beneficiary will then have to repay or refinance this debt before it can be transferred to them. 

What if your estate cannot pay the debts?

If your estate does not have enough money or assets to pay your debts, then they will be erased. Your family cannot legally be made to pay these debts in this instance, if the estate cannot pay and your family does not have a guarantee under any debt or property in their name against this debt. 

What should you do?

Making sure that your loved ones are taken care of, will make administering your estate easier, less stressful and it will also be more cost effective. Having a valid will is essential, as it will allow you to clearly outline your wishes and allow for a smoother administration of your estate. 

Your will should clearly elect an executor, or executors to administer your estate. It is always a good idea to ensure that your selected executor is willing to take on this responsibility. You can elect friends or family, your solicitor or financial advisors. Your will should also be updated every 3 years and your wishes should be clearly stated. 

It is important to have a valid will as you never know what the future holds. Organising a Will is not as complicated as it seems and it can be an easy and fast process. It’s as simple as picking up the phone and organising an appointment with a Succession law expert. So, what are you waiting for?

Phone 1800 22 33 90


Or request a free no obligation appointment on our website

  1. Succession Act 1981 QLD, s61.