What happens to debts after death?
Debts after death
When you die, any debts you have must be repaid from your estate before any other claims on the estate can be met. This is the case whether or not you have made a will.
If you die and have no estate, then your debts die with you as they cannot be repaid. Your relatives are not liable for your debts unless they have provided personal guarantees for those debts.
Your creditors may sue your estate for the payment of outstanding debts.
Your estate is all the property, goods and money that you own that are available for distribution after your death. Certain property and money may not form part of your estate at all.
Family or shared home
If you and your spouse or civil partner are joint owners of the family or shared home, your spouse or civil partner becomes the sole owner on your death. If there is a mortgage on the home, then your spouse or civil partner becomes liable for that mortgage but is not liable for any of your other debts. Your home does not form part of your estate.
If you are the sole owner, then your family or shared home does become part of your estate and is available for the payment of your debts.
Some insurance policies have a nominated beneficiary. In those cases, the proceeds of the policy go directly to that beneficiary and do not form part of your estate. In other cases, the proceeds of the insurance policy do form part of your estate and are available for the payment of your debts. What happens in any particular case depends on the terms of the policy.
Credit union deposits
If you were a member of a credit union, you would have nominated a person to become entitled to up to €23,000 of your savings on your death. This does not form part of your estate.
Joint bank accounts
If you have a joint bank account with another person or people, the question of whether your share of the account forms part of the estate depends on the intention of the account holders when the account was opened. If it was the intention that the other account holder(s) would inherit your share, then your share does not become part of your estate. If this was not the intention, for example, if the account was in joint names purely for convenience, then your share - which may be the entirely of the account - does become part of your estate.
Duty of personal representative
When you die, all your assets are gathered together by your personal representative (your executor or administrator). The first duty of the personal representative is to pay your funeral and other expenses and then your debts.
Your estate is considered to be insolvent if you do not have enough assets to pay your funeral and other expenses and all your debts. If you have no assets, then the payment of your debts does not arise. If you have some assets but they are not sufficient to cover all your debts, the debts must be paid in a set order. If your estate is solvent, there are rules about which assets are to be first used to pay your debts.
The order of priority for payments from an insolvent estate is as follows:
1) Funeral, testamentary and administration expenses. Testamentary and
administration expenses are the expenses incurred in dealing with your
estate; 2) Creditors who have security, for example, mortgage providers; 3)
Preferential debts - these are mainly taxes and social insurance
contributions; 4) Ordinary debts.
If your estate is solvent but not sufficient
If your estate is solvent, then, again, your funeral and other expenses and your debts must be paid first. If you die intestate, the rest of your estate is then divided in accordance with the rules on intestacy.
If you have made a will and your estate is not sufficient to cover your debts and all the bequests which you have made, then the debts are paid from the following assets and in this order:
1) Property which you did not deal with in the will (that is, property which
would be distributed in accordance with the rules on intestacy); 2) The
residue - this is the amount left over when specific bequests are dealt with;
3) Property specifically appropriated for the payment of debts; 4) Property
charged with the payment of debts; 5) Pecuniary legacies - these are bequests
of money as distinct from property or goods; 6) Other bequests.
When making your will, you may specify a different order for the payment of your debts.