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When you lose someone you love, financial stress should be the last thing on your mind.

If you’re worrying about whether you’ll inherit debt from your parents or your partner, exploring the answers to these questions should help you have a clearer understanding about if debt can be inherited in Australia.

Can you inherit someone else’s debt?

If there are outstanding debts in someone’s life when they die, their estate (any assets or money they owned at the time of their death) will pay those debts out. If the debt is secured, the creditor will reclaim the collateral. If the debt is unsecured, the executor of the estate may need to sell assets, such as property or other investments, to repay the creditor. 

Joint accounts

Another way you can inherit a debt problem is if you have a joint bank account with the deceased person.

For example, if you have joint names on a mortgage, you are both responsible for paying the loan. 

With the right legal advice from an estate planning specialist, you can gain a better understanding of how inherited debt may affect you – and how to protect yourself.

Do you have to pay your husband/wife’s credit card debt if they die?

Unless the credit card account is a joint account, the answer is ‘no’. Their estate is responsible. Fortunately, even if you're married to someone, you don't have to repay the debts owed by the deceased person unless the debt is in your name as well.

However, for any joint credit accounts or a mortgage/loan that is taken out together, the surviving spouse may be liable to pay part of or all of the debt. 

Repaying debt

Clear communication with creditors can help keep the situation as calm as possible. Paying off debts can feel exhausting, but by dealing with it, every repayment gets you one step closer to being debt-free.

If paying off debts feels like too much to manage alone, consider strategic, practical support from a trained financial counsellor.

Many organisations are happy to arrange repayment plans, and can sometimes agree to waive penalty fees and charges too.

The bottom line

What happens to debts after death depends on if: • there are any assets in the estate • the debts are secured or unsecured • the debts are only in the name of the deceased, or in joint names • someone has guaranteed the debts.

Before taking out a joint account, signing as a guarantor, or involving yourself with anyone's debt, ensure you understand your obligations. And, if you do inherit debt, deal with it by communicating with your creditors and negotiating a repayment plan.

Go deeper: Who can contest a will?

Financial disclaimer

The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.