Debt is often a touchy subject for many, but unfortunately, it doesn’t just disappear when you ‘kick the bucket’ in South Africa – and understanding the ins and outs of this issue can save your loved ones a lot of trouble down the line.

This is according to debt consultancy firm Debt Rescue, which noted that despite our need for debt while we are alive, it’s about making sure our debts die with us rather than outliving us and causing havoc for those left behind.

In South Africa, your debts don’t automatically get passed on to your family; they are generally not responsible for paying off any leftover debt unless they’ve co-signed a loan or are the secondary cardholder on your credit card.

However, if you’re married “in community of property,” it essentially means that you and your spouse share all assets and liabilities, including debts. This can have specific implications when one spouse passes away.

In any case, effective reassurances are having a will, credit life insurance, and trusts in place.

What happens when you die

In South Africa, your estate – essentially everything you own, from property and cars to investments and personal belongings – goes into what’s called ‘executorship’ when you die, said Debt Rescue.

“An executor, usually someone you’ve specified in your will, will need to step in to manage the process. Their responsibilities range from settling outstanding taxes to paying off your debts,” it said.

The role of an executor is crucial. Their first task is to verify the will’s authenticity. Once validated, the executor becomes the protector of all assets – property, investments, or insurance policies, ensuring they’re well-managed throughout the probate process.

The executor must pay off any outstanding debts and taxes. In South Africa, this also means filing the final tax return and settling any estate duty due to the taxman and creditors.

Your home loan or car finance is known as secured debt. If you still owe money on them, the lender may require the asset (the house or the car) to be sold to pay off the debt.

Unsecured debts, like credit cards or personal loans that do not have credit life, are paid off from the remainder of the estate’s assets after the secured debts have been settled.

After debts and taxes are cleared, the executor can distribute the remaining assets as directed by the will. Through it all, the executor must keep beneficiaries informed.

The role of an executor can be daunting, especially with larger or more complex estates, prompting many to appoint professionals like lawyers or accountants. Still, a trusted friend or family member can also serve as an executor, with the comfort of seeking professional help if needed.

Regardless of who is chosen, their ultimate responsibility is to act in the estate and beneficiaries’ best interests.

However, if your debts exceed the value of your assets, you’re said to be ‘insolvent.’ In this case, your entire estate is used to pay off the debt, and your heirs may not inherit anything, said Debt Rescue.

But remember, they’re generally not responsible for paying off the leftover debt unless they’ve co-signed a loan or are the secondary cardholder on your credit card, it added.

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