What happens to debts after death?
Debts after death
Your estate is all the property, goods and money that you own that are available to be shared out after your death.
When you die, any debts you have must be repaid from your estate before other entitlements are shared out. This is the case whether or not you have made a will. Your creditors can sue your estate for the payment of outstanding debts.
In some situations, property or money can be shared out without becoming part of the estate and so is not available to pay debts. For example, some money in credit unions or joint bank accounts and some insurance policies.
If you die and have no estate, then your debts die with you as they cannot be repaid. Your relatives do not have to pay off your debts unless they have provided personal guarantees for those debts or they are named on the credit agreement
If someone close to you has died, you may need advice on dealing with money matters after a death. If you are having financial difficulties, MABS can offer support on how to manage bills, debts and loans.
Family or shared home
If you and your spouse or partner are co-owners under joint tenancy of the family or shared home, your spouse or partner becomes the sole owner on your death. In other words, your home does not form part of your estate.
If you are co-owners but you each own a defined share of the property, this is called tenancy in common. In those circumstances, your share in the property will form part of your estate following your death.
If you are the sole owner, your property will form part of your estate. However, your spouse, partner or cohabitant may be able to claim a share to the property.
If there is a mortgage on the home, mortgage protection insurance may cover the remaining amounts of the mortgage.
Some insurance policies have a nominated beneficiary. In this case, 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.
Savings and loans
Credit union deposits
If you are a member of a credit union, you can nominate someone to get your savings if you die. Up to €23,000 can pass to the nominated person without going through the usual process for administration of your estate. Amounts over €23,000 must be administered by your personal representative.
Joint bank accounts
If you open a joint bank account with someone else, you can specify what you intend to happen if you die. If you intend the other account holder to inherit your share, then it does not become part of your estate. Otherwise, your share does become part of your estate.
Credit card debt, bank overdrafts, personal loans
If you have a credit card, bank overdraft or personal loan these are known as unsecured debts. They are not attached to any asset so the creditor does not have the right to take a particular item of property if the debt is not paid.
Lenders are entitled to pursue your estate for these unpaid debts on your death. Repayment of unsecured debts must wait until other priority debts are paid.
Your family does not have to cover your debts unless they have provided personal guarantees. If the loan is in joint names the joint holder will be responsible for any debts.
If your loan is with a credit union it will usually be cleared upon your death through the credit union’s own insurance scheme.
Other unsecured debts
Other unsecured debts could include utility bill arrears, nursing home debt or medical bills.
Debts owed are the responsibility of the estate and creditors will usually wait until the estate is settled before they look for payment.
Duty of personal representative
When you die, all your assets are gathered together by your personal representative, that is your executor (if you had a will) or administrator (if you die without having made a will). The first duty of the personal representative is to pay your funeral and other expenses and then your debts.
Your estate is insolvent if your assets do not cover your:
- Testamentary and administration expenses (the expenses of dealing with your estate)
- Debts and liabilities
This is the case whether you had a will or died intestate (without a will).
If you have no assets then payment of debts does not arise.
Whatever assets you do have will be used to pay off your debts in the following order of priority:
- Funeral, testamentary and administration expenses
- Creditors who have security, for example, mortgage providers
- Preferential debts - these are mainly taxes and social insurance contributions
- Ordinary debts, for example personal loans or credit cards
A solvent estate is one where there are enough assets to pay the debts and the funeral and testamentary expenses.
Where there are more assets than liabilities, your estate is solvent. However, if your assets are not sufficient to fulfil all of the wishes in your will, after paying the debts and expenses, your estate is solvent but not sufficient.
If your estate is solvent, your funeral and other expenses and your debts must be paid first. If you die intestate (without making a will), the rest of your estate is then divided according to the rules on intestacy.
If you have made a will but there will not be enough left after paying all of the debts and expenses to give the full gift to everyone, then there is a set order to which parts of the estate debts are paid from first:
- Property which you did not deal with in the will (that is, property which would be distributed in accordance with the rules on intestacy)
- The residue - this is the amount left over when specific gifts are dealt with
- Property specifically devoted for the payment of debts
- Property charged with the payment of debts
- Pecuniary legacies - these are gifts of money as distinct from property or goods
- Other gifts
When making your will, you can specify a different order for the payment of your debts.
For an explanation of the debt terms on this page see our glossary of debt terms.