Are Joint Debts and Guaranteed Loans Owed by Survivors in BC?

When one person on a joint account or loan dies, the survivor often gets a letter from the lender. If you are a surviving spouse, a co-signer or a guarantor, you may wonder whether the whole balance is now yours.

This article explains what the estate generally pays and where your own contract comes in. The rules on joint and guaranteed debts depend on the wording of what you signed, so a lawyer should look at the documents.

This article covers the law of British Columbia.

Why your own contract matters most

There are two separate questions. The first is what the deceased person's estate owes. The second is what you owe because you signed the agreement yourself. A lender's claim against you as a joint borrower, co-signer or guarantor comes from the contract, not from the estate.

That is why you should find the loan agreement, the guarantee and the account terms. Look at who signed, in what capacity, and what the document says about death. Loan terms vary by lender, and a lawyer can tell you what yours means.

What the estate pays

The estate means the property of the deceased person. A personal representative must use the authority the deceased would have had to administer and distribute the estate and account to beneficiaries and creditors. They are liable for the deceased's wrongful acts or breaches only to the extent of the estate's assets. Executors settle unpaid debts before distributing the remaining assets to beneficiaries.

A claim against a deceased person is not cancelled by the death alone, and it can continue against the estate with the personal representative as the party. If the representative disputes a claim in writing, the claimant must start a proceeding within 180 days after notice is given if the claim is already due, or the claim is forever barred. That period does not apply to beneficial-interest claims by beneficiaries or intestate successors, or to wills variation claims.

Secured loans, mortgages and plan benefits

A secured lender keeps its security. Gifts of property subject to a purchase money security interest, such as a mortgage or loan that financed the property, generally pass with the debt. Between persons claiming through the will-maker, the beneficiary's interest is primarily liable to pay the secured debt. That rule yields to a contrary intention in the will, and a general direction to pay debts does not by itself show that intention.

The plan benefit protection 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.

Time limits and what you sign

Under the Limitation Act, a claim must not be commenced more than 2 years after the day on which it is discovered. A claim must also not be commenced more than 15 years after the day on which it arose, with the Act's listed extensions. A written, signed acknowledgement of liability, or part payment of a liquidated sum, can restart the clock for a debt.

That means a letter or payment made to a lender in the first weeks after a death can have legal effect. Get advice before you acknowledge a debt in writing or pay on one that you are not sure you owe.

What to do next

• Find every agreement you signed, including loans, credit lines, guarantees and mortgages.
• Note the lender, the balance and whether the debt is secured.
• Tell lenders in writing that the other person has died and who the personal representative is.
• Avoid signing acknowledgements or making payments until you have advice.
• Ask a lawyer how the contract applies to you and how the estate will deal with the debt.

Frequently asked questions