Who is responsible for my debts when I die?

Who Is Responsible for My Debts When I Die? A Complete Guide to Death and Debt

When someone passes away, one of the most common questions families ask is: "Who is responsible for their debts?"

It's a confusing and emotional topic, especially for families on the NSW-VIC border, where laws can differ depending on which state applies.

As a Wills and Estates law firm in Albury, we help families navigate both New South Wales and Victorian estate laws. Below is a clear, practical guide to understanding how debt is handled after death—and who may (or may not) be responsible.

Do Your Debts Disappear When You Die?

Not exactly.

Most debts do not automatically disappear, but they also do not usually pass on to family members.

Instead, debts must be paid from the deceased's estate, which includes:

• Bank accounts
• Property
• Vehicles
• Investments
• Personal belongings

Only after debts and liabilities are paid can the remaining assets be distributed to beneficiaries.

Who Is Responsible for Paying the Debts?

The Estate Pays First

Before any inheritance is distributed, the executor (if there is a Will) or administrator (no Will) is required to:

1. Identify all debts
2. Notify creditors
3. Pay debts from estate assets

This process occurs in both NSW and Victoria, though the paperwork and court processes (Probate or Letters of Administration) differ slightly.

Are Family Members Responsible for the Debt?

In most cases: No.

Family members are not personally responsible for the deceased’s debts unless:

They were a joint account holder

For example:

• Joint mortgages
• Joint credit cards
• Joint loans
• Joint debt survives the death of one borrower.

They were a guarantor

If someone guaranteed the deceased’s loan, they can be pursued for the outstanding balance.

What Happens to Specific Types of Debt?

Credit Cards

Unsecured credit card debt is paid from the estate.

If the estate has no money, the debt is usually written off.

Home Loans (Mortgages)

A mortgage does not disappear.

The options may include:

The executor selling the property and paying the loan

• A beneficiary refinancing the loan
• A joint borrower continuing repayments

Personal Loans

These must be repaid from the estate, unless there is a guarantor.

Car Loans

The lender may repossess the vehicle or the estate may pay off the remaining loan.

Medical Bills & Aged Care Fees

These are treated like other unsecured debts and are paid from the estate.

Tax Debt

The Australian Tax Office can claim unpaid tax from the estate.

What If the Estate Has More Debt Than Assets?

If debts exceed assets, the estate is insolvent.

In this case:

• Creditors are paid in a strict order
• Beneficiaries receive nothing
• Family members do not inherit debt

Executors must be very careful when dealing with insolvent estates and should seek legal advice before paying any creditors.

Differences Between NSW and Victoria

Although the principles are similar, key differences include:

NSW

• Probate is managed by the Supreme Court of NSW
• The Probate and Administration Act 1898 (NSW) applies
• Some timelines for creditor notices differ

Victoria

• Probate is managed by the Supreme Court of Victoria
• The Administration and Probate Act 1958 (VIC) applies

Families in Albury–Wodonga often have assets or debts spread across both states, so advice from a cross-border estate lawyer is essential.

Can You Protect Your Family From Debt Issues?

Yes—there are simple legal steps you can take:

• Prepare a valid, up-to-date Will
• Keep clear records of debts and assets
• Structure loans properly (avoid unnecessary joint debt)
• Seek advice when acting as guarantor
• Review your estate plan after major life events

A well-drafted estate plan helps protect loved ones and prevents unnecessary financial stress.

Need Help With Estate Planning or Deceased Estates in Albury?

As a law firm experienced in Wills & Estates across both NSW and Victoria, we help clients:

• Draft Wills
• Set up estate plans
• Apply for Probate or Letters of Administration
• Administer estates with debt
• Manage cross-border estate issues

If you need guidance about debts after death or estate planning, we’re here to help.