What happens to your debts when you die?

This is obviously a sensitive subject for many, but still very important to consider to avoid any extra heartache during what is inevitably a trying time.

So, what happens to your debts when you die?

In most cases, unless other plans have been made and put into place, your estate – which includes any assets such as Kiwisaver, vehicles and property – are liable for any outstanding debts left when you shuffle off this mortal coil.

Ok, well what if you don’t have any assets, or limited assets, but a bit of debt when you pass away?

Obviously, each individual situation will be different, but here are some common ones:

Renting? If you pass away while renting, your estate will have to give 21 days’ notice to landlord and be liable for rent for those 21 days after notification.

If you have a student loan this debt might be written off by IRD. However, if they are not informed about the death by your estate or family, it can create a debt obligation

If you have a credit card, buy now pay later, hire purchase, mortgage and bills etc. when you die these may be written off at the discretion of the creditor but if not, your estate is liable or linked to those debts, so informing all creditors and interested parties as soon as possible is very important.

And obviously, if you leave joint debts or have a loan with guarantor – the surviving party is liable for those.

How can you avoid leaving a financial nightmare as your legacy?

Leave a will, even if you own nothing but owe money, as this will make it easier to sort out your finances after you pass away. See your lawyer if you have one or go to the public trust.co.nz website.