Most of us would like to think that our relatives are going to be looked after when we’re not around anymore, or at the very least, be sure they won’t inherit any debts we might have built up over the years.

But the idea that personal debts ‘die with us’ is only partly true – your creditors can still recover their money from your bank account, savings and the sale of any assets (like property or a car). Even though family members are not personally liable for your finances, if you die with substantial arrears they certainly won’t receive the nest egg you’d like to expect.

What people often don’t realise is that, when it comes to settling your estate, creditors always come ahead of anyone else named in your will, or who would automatically inherit your money if you don’t have one, such as children or siblings.

Depending on how much you owe, they may receive nothing from your estate after the debts have been settled. It is only when you die without owning a property or possessions of any value, or what you do leave amounts to less than you owe, that personal debts are finally written off. Mortgages, rent arrears and fuel bills must be paid off first, followed by loans and credit cards, although your family could still be faced with contacting each of your creditors to explain the situation, which is extremely distressing.

Things get a little more complicated if, like many of us, you have a joint mortgage, bank account, credit card and/or loan. This is an occasion where families do technically inherit your debts because they are then responsible for the outstanding amount. You should be aware that your legacy could also be at risk if you’ve amassed debts as a sole trader or acted as a guarantor for a loan or mortgage for someone who is unable to pay, since the creditors will look at your estate.

If you have a large mortgage, high interest loans or car finance in both of your names, consider putting safeguards in place to protect their finances after you’re gone. Life insurance policies can be cheap to buy if you’re in reasonably good health, and give you peace-of-mind that your dependents would receive a lump sum to pay off the mortgage. Remember that it works the other way too, so make sure your partner is not accruing debts in your name.

The phrase ‘get your house in order’ is often used as we get older, and it certainly rings true here. Plucking up the courage to seek advice and start paying off your debts is never easy, but getting help will set you on the path to financial freedom, so you can put your family on a more secure footing for the future.

For free and confidential debt support, please contact one of our advisers.