What happens to unsecured debt when you die?

[FreakOfNature]

I'm very debt averse and whilst me and Dh use a credit card it's always paid off and we only buy bigger items when we can afford it. We own our 2 8 year old cars outright and have never had an overseas holiday. Yet all around us people have new camper vans, drive new cars and going abroad with a case of new clothes/hair/nails is the norm.

I know from general chat with friends that 'buy now pay later' is considered very much part of life. But what happens to credit card debt, PCP, Klarna etc if you die?

Is it covered by what's left of your estate? Which is probably not a lot if it wasn't there to begin with. Do your kids have to deal with it in some way? Or is just wiped?

We're mid forties, kids late teens so starting to plan ahead and wondering if we're the silly ones for not grabbing more of life in our prime family time

It is expected to be paid by any funds left in the estate. However, if your accountant or whoever deals with your estate deems there to be insufficient funds, then yes it is wiped off.

If there is money in your estate, that is used to pay the debt (after funeral expenses). So your children would get a smaller inheritance as the debt would be paid first.

If you die insolvent and your estate can't pay the debt, it is then written off.

If you are thinking about taking out credit for discretionary spending, check how much you are going to pay in total including the interest. It can be sobering how much more it costs you in total.

Think about what truly improves the happiness and wellbeing of your family. Don't fritter money on things that don't really matter.

Your children won't be expected to pay off your debts. Your debts die with you unless there is enough money left in your estate, in which case they get paid out of that.

The debts are paid out of your estate. But my dh's parents and step df all did this (his mum went on a spending spree) which meant we had lots to sort out and 3 funerals to pay for as there was no money to pay for those either.
It's not as easy as saying they die with your estate, yes they do but it leaves the people dealing with it to prove there is no money. Its an almighty hassle (and it's recently popped up for us again 11 years later).

Perplexed20, has that affected how you manage your own finances? Has it made you more debt averse?

We live within our means because we want to give our kids some security, however, there is so little left at the end of the month that I do wonder how much they will be left with.

We are in the 'just about managing' bracket, but no debt. So should we live more for the now if that debt goes with us 🤷🏻‍♀️

I very much doubt i ever will, but this is what I question almost daily in the summer months.

Few people will run up sufficient debt that it significantly enhances their lifestyle but it is then wiped on death without having to either pay it back, or go through the worry and stress of 'bad debt' in between.

In your mid 40s, hopefully you won't die any time soon, so chances are that you'll need to pay back any money you borrow in the coming months/years possibly with a significant amount of interest on top.

The other people who are spending money on 'camper vans, drive new cars and going abroad with a case of new clothes/hair/nails' either have more money than you, either due to earning more, prioritising their money differently, inheritance or other family help, or they may be managing cashflow with debt.

If they do have debt, that debt has to be paid off, which will be at the cost of their future financial security, because the monthly payments will reduce their disposable income and ability to save.

But on the matter of prioritising, it seems to be very common on here for people to spend a lot of money on property and groceries, because a lot of people are very particular about where they live and have a mindset about having to spend a lot of money on food and cleaning products. A lot of other people on similar incomes will live in a smaller house in a cheaper area, and not spend as much on groceries, so have a lot more money available for lifestyle spending.

When my Mum died in 2019 she had substantial credit card debts. I had to pay it off with what was left when we sold her house.

When my brother died he had thousands of pounds worth of debt. Phones, loans, debts that had been passed on to collection agencies. He had no money and died abroad so the costs of repatriating his body were significant.

Once we had the death certificate I notified everyone that he was dead and had left no will and had no assets. I guess my mum was technically his NOK but she was in her 80s with advanced dementia so couldn't be expected to deal with anything.

All of the debts were written off.

He must have lived in a permanent state of worry about his debt and I wish I could have him back for long enough to tell him that everything had been wiped clean and none of it really mattered.

If people have new cars and camper vans they can be sold to recoup some of the money

Yes. Only debt we have is our mortgage.
I save up for things like holidays. We don't do things we can't afford.

I would like not to have to thjnk about it but I'm also very happy with my life.