Debts you leave behind

Everything you leave when you die is called your estate. This is the value of everything you own, minus everything you owe. Whatever remains goes to your beneficiaries. These are people who receive money or other assets from an insurance payout or inheritance, for example when someone dies.

If you have debts, they reduce the size of your estate, so your beneficiaries receive less. If your debts amount to more than the value of everything you own, there will be nothing left for your beneficiaries. But these debts are cancelled and your beneficiaries won’t have to pay them.

There are some exceptions to the situation described above:

  • Student loans – These are automatically cancelled on death and do not reduce the size of your estate.
  • Borrowing covered by life insurance – If a loan is secured against your home, the home would normally be sold to raise the money to repay the loan. But if you had taken out life insurance along with the loan, the life policy will pay it off instead without any sale of the home. Similarly, if you had taken out life insurance with any other loan, the loan will be automatically repaid. There are two types of life insurance: term insurance and investment-type insurance. Term insurance only pays out if you die within a set time (the term). Investment-type insurance pays out an agreed sum when you die. But it can also be cashed in during your lifetime, and so can be used as an investment.
  • Joint borrowing – If you took out a loan jointly with someone else, you’re both responsible for the whole loan. So, in the event of your death, your joint borrower must take over making the full repayments (unless life cover has repaid the loan as described above).

We have more information about sorting out an estate.

Back to Managing debt and borrowing

Debt and borrowing overview

Living with cancer can bring extra expenses. Learn how to manage your debts using a clear step-by-step process.

Step 1: Increase your income

Increasing your income is the first step to managing your debts. Check your entitlement to benefits and insurance payouts.

Step 2: Reduce your expenses

Once you have made sure you have as much money coming in as possible, there are ways you can reduce your expenses.