Is It Possible to Inherit Debt?

The loss of a family member or loved one is an incomprehensively difficult thing to go through. While finances and money are probably the last thing on your mind in this case, it is important that you understand how debts and assets impact you and your family to ensure that you and your heirs are not financially compromised.

So, can you inherit debt? Let’s explore the topic of debt inheritance, what kind of debt can be inherited, and the options you have in the face of such an unfortunate situation.

Can you inherit debt in South Africa?

If a parent passes away, their debt will be paid by their estate. If there is not enough money in their estate account, their debt will be written off. However, if you co-signed for your parents’ debt, you will be responsible for it.

Does mortgage debt transfer after death?

If you inherit your parents’ house, you can make an application to take over the payments of their mortgage. If you see no value in keeping the house, you can sell it. You will not be required to pay off the mortgage immediately as you have the option to make monthly payments. If you cannot afford the payments, the house will need to be sold to someone who can.

The same principle will apply to a vehicle if the beneficiaries are unable to fulfill the repayments; the car will be auctioned off in order to cover the outstanding debt.

Are beneficiaries responsible for debts left by the deceased?

According to SARS, once an executor has finalised all the administration in the deceased estate, the remaining assets, after paying all the debts, will be distributed to the beneficiaries.

What documents are required to complete the income tax return for a deceased estate?

The following documents are required to complete the income tax return for a deceased estate:

• Certificates received for local interest income, foreign interest income, foreign dividend income, tax-free investments.
• All information relating to capital gain transactions (local and foreign).
• All information relating to the letting of assets.
• Financial statements for trading and farming activities (if applicable).

It’s worth noting that your credit life cover can also pay off your debt if you pass away. When you take on debt, your credit provider should also offer you credit life cover which is designed to help you pay off your debt should you lose your income due to disability, retrenchment, or death.