Who Pays a Deceased Person's Debts in Alberta?

After someone dies, bills keep arriving: credit cards, a mortgage, a line of credit, tax balances, funeral costs. It is natural to wonder whether the money comes out of the estate, out of your own pocket as an heir, or from no one at all.

In Alberta, the starting point is that the estate pays. This article explains how that works, how the person running the estate deals with creditors, and the situations where someone can end up personally responsible. Your facts matter, so a lawyer can confirm how this applies to you.

This article covers the law of Alberta.

The estate is the first source of payment

Alberta's Estate Administration Act makes it a duty of the personal representative to satisfy the debts and obligations of the estate. Alberta government guidance says a representative who chooses to administer an estate must satisfy those debts if the estate has funds to do so.

The Act defines a valid money claim as a debt owed by the deceased, or another claim that would produce a money judgment against the deceased once its validity is determined. Heirs are not named as debtors, because the claim is against the estate. Burial and funeral expenses are also the estate's responsibility.

How creditors are dealt with

A personal representative must follow the Surrogate Rules when giving notice to claimants, who are the creditors. The representative may also require a claimant to verify the claim and state the value of any security held. The court forms for creditor notice are GA15 (Notice to Creditors and Claimants), GA16 (Statutory Declaration of Publication) and GA17 (Statutory Declaration by Creditors and Claimants) for applications filed on or after June 15, 2022.

A representative may contest a claim in whole or in part. If the claimant does not apply to court within 2 months after notice of the contest, the claim is barred. A claim that is not yet payable cannot be enforced without the Court's permission.

Creditors are not limited to waiting. A creditor can apply to administer the estate themselves in order to collect a debt.

When someone can be personally liable

A personal representative is subject to all the liabilities and duties of a trustee, which is the source of personal liability if they distribute improperly. They must also act with the care, diligence and skill of a person of ordinary prudence.

• Distributing too early or without following the notice steps can expose the representative to claims they could have avoided.
• Distributing assets without a CRA clearance certificate makes the representative personally liable for unpaid tax amounts, up to the value of the assets distributed.
• A beneficiary who received property can lose it, up to its value, if a valid claim from a creditor who was not notified surfaces later.

A representative who has complied with the notice rules may distribute having regard only to the claims they know of at that time, and is not liable for a claim they did not know of. That protection does not end the creditor's right to pursue the person who received the property.

Special debts: mortgages, taxes and reverse mortgages

Balances owing to the CRA are paid out of the assets of the estate, and the legal representative is responsible for making sure the deceased's taxes are filed. A reverse mortgage works differently: the death of the last borrower triggers repayment, and the estate typically has a limited window that may be shorter than the time needed to settle the estate.

Mortgages on real estate have their own rules. Unless the will or another document shows otherwise, a mortgaged property interest is primarily liable for its own mortgage debt, and a general direction in a will to pay debts does not shift the mortgage to other assets. What a lender can do on death under an ordinary residential mortgage depends on the mortgage contract, so check it.

What to do next

• Do not pay debts from your own money, and do not distribute estate property, until you understand what is owed.
• List the deceased's debts, assets and any mortgages, and keep every letter from creditors.
• If you are the representative, ask a lawyer about the notice-to-creditors steps before distributing.
• Ask about a CRA clearance certificate before distributing; CRA says the assessment can take up to 120 days if all necessary documents are provided, and it may need to audit first.
• If a creditor is contacting you personally, ask them to put the claim in writing and get advice before agreeing to anything.

Frequently asked questions