Who Pays Debts When Someone Dies

High debt estates can be worrisome for family members. Especially if you are estate trustee and spouse, you may be wondering do I owe their debts myself? 

When you’re new to administering a deceased’s estate, Axess Law has probate lawyers near you who can explain how probate law works. We draft and submit probate applications for you. Your first consultation is free. 


What is Probate?

When you probate an estate, you go to Ontario court for a certificate of appointment of estate trustee, with or without a Will. You bring proof of death and the deceased’s original last Will and testament, with any changes. The court verifies Wills are valid and appoints you to collect and value assets, pay debts and distribute any balance to beneficiaries.


Ontario Probate Law on Debts

Most estates have debts. Your situation is not unique, but it can be stressful. First off:

  • Debts are not relieved after death.
  • Spouses and adult children are generally not liable .
  • If you co-signed a debt, you are responsible for any outstanding balance.
  • Estate assets go to pay debts first.
  • Estate trustees who fail to honour debts can be liable. 


Whose Liability Is It?

Normally, debts are a creditor’s alone. 

You make yourself “jointly and severally liable” for someone else’s debts if you:

co-signed a loan

gave a joint promissory note

shared a mortgage

issued a supplementary credit card

indemnified a creditor for the deceased

or were a joint account holder.


Why Joint Liability?

Debts are an enduring obligation. 

When a debtor dies, secured creditors are first in line, then unsecured creditors, way before beneficiaries inherit. Obviously, if your loved one had many debts and few assets, they were likely insolvent or bankrupt. That means beneficiaries may inherit very little or nothing at all. 

Co-signers and mortgage holders bear the burden of debt if anything happens to other parties to legal contracts. Debts are not shared equally, but all parties are responsible for the whole amount, even parts they didn’t incur. 

Fortunately, if that’s you, the deceased’s assets can be used to help pay debts. Just contact the estate trustee, with itemized bills showing the full amounts owing.


When Estate Trustees Are Liable

Estate trustees only become personally financially liable if they mismanage the deceased’s assets, such as distributing the estate before paying debts. Making reckless investments that deplete the estate of resources, like playing the horses, can also land you in probate court. 

Before you make any moves, let Axess Law’s probate lawyers explain your estate trustee obligations.


Managing Insolvency or Bankruptcy

Some estates are just plain insolvent, meaning they are not bankrupt, but the deceased owed $1,000 or more in provable claims to creditors, and all of the following were true:

  1. They couldn’t meet obligations as were due.
  2. They ceased paying obligations “in the ordinary course of business as they generally become due”.
  3. Their estate is insufficient, after legal auction or fair valuation, to pay all or any debts you know about or may receive.

When that’s the case, talk to Axess Law first. We can review your estate trustee responsibilities and refer you to licensed insolvency trustees. Most importantly, pay only burial or cremation costs, if you can, and estate and income taxes. Leave the rest to an insolvency trustee or bankruptcy court.

The debtor may have already filed for protection under the Bankruptcy and Insolvency Act (Canada), or have a consumer proposal payoff that is due. Remember, it’s not your personal responsibility to pay debts the deceased has left.


Can Creditors Pursue You?

Creditors may contact you, but they cannot harass you over unpaid debts. They have a right to take legal action, in Small Claims Court or Ontario Superior Court, and let a judge decide. When a complex court action is likely, we refer you to our trusted legal partners.  


Informing Creditors About a Death

Secondly, estate trustees are obliged to let creditors know a debtor has passed away. You can do this by placing death notices in local newspapers where they lived or posting a notice online. 

If you know who held a mortgage or credit cards, contact creditors directly to request itemized statements. Inform beneficiaries too. Don’t be surprised if they sue for inheritances they think they are owed..

The funeral director who has the medical certificate of death can give you proof of death to send creditors or beneficiaries until the formal certified copy of death registration is ready, in about 12 weeks. 


Why Exemptions May Not Protect You

Some testators (Will makers) try to reduce estate trustees’ liability by including exemption or “exculpatory” clauses in Wills. Courts generally agree — creditors and beneficiaries can sue you if:

  1. You were dishonest.
  2. You failed to follow the Will faithfully, unless it was impossible.
  3. You didn’t act prudently, as any reasonable business person would.
  4. You were in a conflict of interest, such as not treating beneficiaries equally.

Proceed with caution. You could wind up reimbursing beneficiaries from your own pocket and paying legal fees — yours and theirs. (Provided you acted honestly and reasonably, the Ontario Trustee Act may relieve you of personal liability.)


Your First Consultation is Free

Axess Law’s probate lawyers offer legal advice on administering estates, including when there is no Will and estate. Your first probate consultation is free. Our quotes for probate services are all-inclusive — Axess Law has no hidden fees or surprises.

Our probate attorneys help you apply for a certificate of appointment of estate trustee, if you don’t already have one. We answer questions about estimating estate administration taxes and preparing the estate information return. We can also apply to the court to waive the administration bond, worth twice the estate’s value, you may be required to post.  

Ask us if you’re uncertain what to do next. No question is too complicated.


Make Probate Appointments Online

Axess Law’s licensed lawyers can remote in with you on secure, live video calls anywhere in Ontario. Use our easy online booking form to make an appointment or phone our 1-647-479-0118 lawyer line (toll free to 1-877-402-4207). In person appointments can be arranged at any Axess Law locations in Greater Toronto area or Ottawa. We’re open 7 days a week, with day or evening appointments at times convenient for you.