- The estate's assets are the source of payment for the deceased person's debts, and an executor's liability is generally limited to the estate's assets.
- An executor can become personally liable through their own acts, for example by distributing property without a CRA clearance certificate while tax is owing.
- Joint debts, co-signed loans and guarantees depend on the contract the surviving person signed, so read the paperwork before you pay or admit anything.
A call from a creditor a few days after a funeral is upsetting. If you are a spouse, child or other relative, you may fear you are now responsible for what the person owed.
In general, the estate deals with a deceased person's debts, but there are exceptions. This article explains the general position in British Columbia, where family members can be at risk, and what to do when the calls begin.
This article covers the law of British Columbia.
The estate pays first, not the family
In WESA, the estate means the property of the deceased person. The personal representative has the authority the deceased would have had if living and must use it to administer and distribute the estate and to account to beneficiaries and creditors. An executor's duties include settling unpaid debts and overpayments, including taxes owed to the CRA, before distributing the remaining assets to beneficiaries.
So the estate's assets are the source of payment. A claim against a deceased person can continue against the estate, with the personal representative as the party. Whether you are named in a claim depends on your role, for example as executor, and on what you signed yourself, so it is worth confirming with a lawyer.
When the executor can be personally liable
A personal representative is liable for the deceased's wrongful acts or breaches only to the extent of the assets belonging to the estate, subject to the exceptions in WESA s. 149. Personal liability mostly comes from the representative's own acts, such as distributing improperly, and not from the debts themselves. A representative who renounces and has not intermeddled in the estate is not liable under s. 149(2).
Tax is the common trap. A legal representative who distributes property without a CRA clearance certificate while tax is owing is personally liable for the unpaid amounts, up to the value of the assets distributed. The request is made on Form TX19. Once a certificate is issued, liability for unpaid tax shifts from the representative to the estate, trust, corporation or the people who received the assets.
An executor may also publish a notice to creditors in the Gazette under WESA s. 154. The notice requires claims to be presented within a stated period that must not be less than 30 days from the date of publication. After that period ends, the executor is not liable for claims that were not presented in time. The protection is for the executor: the notice does not prejudice a creditor's right to recover estate assets from whoever received them.
Where family members can still be at risk
If you signed on a debt yourself, your position may depend on that contract rather than on the death, so it is worth confirming with a lawyer. The table sets out the main situations. Which one applies depends on the contract, and a lawyer can confirm.
| Situation | What to check |
|---|---|
| A joint debt or joint account | The agreement you signed with the lender. The survivor may still be bound under the contract |
| A loan you co-signed or guaranteed | The terms of the co-signing or guarantee document |
| Property you inherit with a loan secured on it | The gift generally passes with the debt, so the beneficiary's interest is primarily liable to pay it, unless the will shows a contrary intention |
| You received estate assets after the executor published a notice to creditors, and a creditor missed the claim period | The executor is not liable for claims not presented in time, but the creditor's right to recover estate assets from whoever received them is not prejudiced |
| You act as executor and distribute property without a CRA clearance certificate while tax is owing | You are personally liable for the unpaid amounts, up to the value of the assets distributed |
As a beneficiary, you receive what remains after the executor settles the estate's debts, including taxes owed to the CRA. So what you receive can be affected if the estate has to pay creditors first.
Assets that pass outside the estate
A benefit payable to a designated beneficiary under a WESA Part 5 benefit plan, such as an RRSP or similar plan, does not form part of the participant's estate and is not subject to the claims of the participant's creditors. This depends on a valid designation. If the estate is the beneficiary, or no designation takes effect, the benefit is part of the estate and available to creditors.
What to do next
- Do not agree to pay, and do not sign anything admitting the debt, until you know who is responsible. A written, signed acknowledgement of liability can restart the limitation clock for a debt.
- Ask any creditor to put the claim in writing and send it to the executor or administrator.
- Check whether you signed on the account, as a joint holder, co-signer or guarantor.
- If you are the executor, keep records and get advice before distributing anything.
- Speak with a lawyer if a creditor insists that you personally owe the money.
Frequently asked questions
Do my parents' debts become mine when they die?
Generally the estate's assets are the source of payment, and the personal representative must settle debts before distributing what is left to beneficiaries. You may still be bound by a debt you signed for yourself, such as a joint or guaranteed loan, depending on the contract.
Can a creditor demand money from me as the surviving spouse?
It depends on whether you are a party to the debt. The estate's assets are the source of payment for the deceased person's debts, while a joint account or a loan you co-signed depends on its contract. A lawyer can read the documents and confirm.
Can I be personally liable if I am the executor?
Your liability for the deceased's wrongful acts or breaches is limited to the estate's assets, subject to exceptions. Your own acts matter more, such as distributing property without a CRA clearance certificate while tax is owing.
What if I received an inheritance and a creditor was missed?
A notice to creditors protects the executor after the claim period ends, but it does not prejudice a creditor's right to recover estate assets from whoever received them. Get advice before spending or giving away a large inheritance while the estate's debts are unclear.
Sources
- Wills, Estates and Succession Act, s. 1(1) (BC Laws) — bclaws.gov.bc.ca
- Canada.ca – Represent someone who died — canada.ca
- Limitation Act s. 24 (BC Laws) — bclaws.gov.bc.ca
- CRA – Apply for a clearance certificate — canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
This is a wills & estates question
Ask our Team for a quote. We reply by email.