Who pays the debts of a deceased? Difficult question that many of you ask yourself and ask you if a waiver of the succession is necessary. If you are not yet sure how to protect your loved ones and how to cover your financial situation in the event of death, this article is for you.
The payment of the monthly payments of a loan after the death of the borrower will depend on the subscription of an insurance. In this case, it is the insurer who will assume the repayment of the capital from the creditors of the borrower. In some cases, insurance is optional, especially for consumer loans. However, it is mandatory for a mortgage because of the amount of money involved and the expected repayment period. It covers the lender and the family of the borrower. And thanks to her, you will no longer have to ask yourself the question “What happens to the debts of a deceased person?”
An unpaid credit balance insurance is used to repay the monthly payments of an outstanding loan in the event that the debtor dies. This insurance is not mandatory but is recommended by most banks and credit agencies. On the other hand, it allows you to cover your loan temporarily until the end of the term.
The outstanding balance insurance covers the current credit and covers the payment of claims according to the features of the insurance contract carried out by the deceased before the death. It is important to have insurance when you subscribe to a loan to guarantee your family a strict minimum of financial security. Thus, no waiver of the estate should be considered to protect you from the debts of your deceased relatives.
The borrower has not taken out insurance
If the borrower has not taken out any life insurance at the time of the contraction of a loan, it is the assets of this one which will be used to pay the debts of a deceased person. A notary will carry out an inventory of movable and immovable property and funds of the deceased in order to estimate the value of assets and liabilities of succession and to share them with the heirs.
The amount of the debts of the deceased is greater than the amount of the inheritance
There are three solutions in accepting inheritance:
- Pure acceptance
- Acceptance under the benefit of inventory
- Renunciation of succession
1. Pure acceptance
The question always arises: who pays the debts of a deceased? In the case of outright acceptance, the heir will have to bear all the expenses and debts of the estate.
When the heir accepts the succession, he can not renounce or accept under the benefit of an inventory. In this case, the inheritance of the deceased and that of the heir are united. The property passes to the heir, who is also paid the debts of the deceased since they also became his debts.
2. Acceptance under the benefit of inventory
When the heirs have doubts about the estate and who has to pay the debts of the deceased, it can be dangerous to accept it altogether. Indeed, as explained, they will have to pay the debts of the deceased. On the other hand, if the heirs consider a waiver of the estate for fear of debt, they will not be able to accept it if they later find that the asset is much larger than the liabilities.
In order to prevent the heirs from finding themselves in such a situation, the law provided that the heirs can accept the estate under the benefit of inventory. In this case, a notary will draw up an inventory of the deceased’s patrimony, and it will not be merged with the heritage of the heirs. Any debts of the deceased will not be payable with the capital of the heirs. It should be noted that the heirs who accept the estate under the benefit of an inventory will still have to pay the estate tax (which can be very high) to the tax authorities.
3. Waiver of succession
If the heir refuses to pay the debts of a deceased, he can sign what is called an act of renunciation. He will lose his status as heir and will not have to pay any debts of the deceased. But in return, he will not receive the inheritance which should return to him, then shared between the other heirs.
In addition, the heir will not be required to report to the estate the property he would have received during the lifetime of the deceased as an advance on his estate, unless, because of such donations, the other heirs do not receive not the minimum share reserved for them by law.
A renunciation of the succession is final. If the heir renounces, he can no longer accept the estate, even if he learns that the deceased had an asset of which he was not aware.
It is important to protect yourself when you take out a loan. You are never safe from an incident that could affect the financial situation of your loved ones. Because yes, knowing who pays the debts of a deceased person is never easy and can, very often, create tensions within families.
Feel free to compare financial institutions to find the loan that suits you best.