Guest Contributor Craig Sebastiano from

Let’s face it: death happens. That, we are certain. During the process of estate planning, you’ll likely spend a lot of time trying to decide what happens to your assets after you’re gone. But what happens to your mortgage and other forms of debt when you die?

Debt after death

The good news is your debt can’t be inherited by your spouse, partner, or another family member. However, if one of them is a co-signer on a debt, your estate and the living family member are legally responsible for the debt.

Your debt includes your credit card, lines of credit, mortgage, car loans, as well as unpaid bills, taxes, and payments. If there’s a co-signer on your mortgage, you may want to use a mortgage calculator to see if they can afford to pay the mortgage on their own.

The role of a will

A will is used to distribute your assets, not your debt. However, money can’t be distributed to your heirs until all of your debt is paid off. If there isn’t enough cash, assets will need to be sold to pay off debt. The remaining assets can then be distributed to your beneficiaries.

Dying without a will can cause a lot of trouble for your family because provincial or territorial law will decide how your assets are distributed. Having a will allows you to decide who receives certain parts of your estate, name a guardian for any of your children who are minors, protect a common-law spouse, and choose an executor for your estate. A will can also minimize possible family disputes.

Making life easier for loved ones

If you’re worried that your estate won’t have enough assets to cover your debts, you should consider buying life insurance, creating a larger emergency fund, or paying down your debt as quickly as possible.

If you have debt on one of the top credit cards in Canada, it’s possible to purchase credit card insurance. For example, CIBC offers life insurance on its credit cards of up to $25,000. However, it won’t be paid if you’re age 80 or older.

Whatever you decide to do, you don’t want to have debt in retirement. Your income will more than likely be significantly lower than it was when you were working, making it harder to pay down debt in your golden years.

The bottom line

Having debt when you die means it can take a while for your beneficiaries to receive proceeds from your estate. While your debt will not be transferred, it is still important to plan for repayment and clearing debts while you are still able to.

Remember, if you have more debt than assets, your loved ones could end up with nothing after you’re gone.

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