Who Pays a Deceased Person's Debts in Manitoba?

After a death, bills can arrive quickly: credit cards, loans, utilities, taxes. Many people worry that they now owe these amounts personally, simply because they are family.

In general, the debts of the person who died are dealt with through their estate. This article explains how that works in Manitoba, when someone can be personally responsible, and what happens when there is not enough money.

This article covers the law of Manitoba.

The estate pays first

Estate assets must cover debts before will beneficiaries inherit, and paying debts is one of the administrator's tasks. That means the money and property of the person who died are used to pay what they owed before anything is handed out to the people named in the will or to relatives on an intestacy.

Funeral costs are part of this. The executor, next of kin or a friend can arrange the funeral and burial, and the estate pays. If the estate lacks money for a basic funeral, Employment and Income Assistance may be asked to pay.

When someone can be personally liable

Whether you personally owe a particular debt depends on the facts, so it is worth confirming with a lawyer. A person may be personally responsible for their own reasons, for example if they signed the loan as a co-borrower or guaranteed it. The loan documents will show this, and a lawyer can confirm your position.

The executor or administrator has a different risk. These are the main ways it arises:

Notice to creditors and final taxes

Under The Trustee Act s. 41, a personal representative who publishes the required notice to creditors, in The Manitoba Gazette and a local newspaper, may distribute after the notice period. They are not liable for assets distributed to a person whose claim they did not know of at distribution.

There are limits. Creditors can still follow estate proceeds into the hands of recipients, the protection does not apply to heirs, next of kin or legatees claiming as such, and mortgagees and unpaid vendors keep their remedies against the land.

The final income tax return has its own deadlines, which the CRA sets. For a death between January 1 and October 31, it is due and payable by April 30 of the following year. For a death between November 1 and December 31, it is due within 6 months of the date of death. If the deceased or their spouse or common-law partner was running a business, filing is due June 15 of the following year for deaths from January 1 to December 15, although the payment deadline is unchanged.

What if the estate runs short?

When debts are larger than the assets, the beneficiaries generally receive little or nothing, since debts come before their gifts. The order in which different creditors are paid can be complicated, so a lawyer should confirm it before the executor pays anyone in a shortfall.

A surviving spouse or common-law partner may also have a claim for equalization under the Family Property Act. That payment is a debt of the deceased, payable after other liabilities, and it ranks ahead of gifts under the will. Funeral and testamentary expenses are excluded from the equalization calculation.

For some small estates where the Public Guardian and Trustee acted for the deceased, it may sell property to pay debts and funeral expenses and then distribute to next of kin or beneficiaries.

What to do next

• Do not pay debts from your own pocket, and do not agree to take on a debt, until you know whether the estate can cover it.
• List every debt and every asset, and keep the bills and letters you receive.
• Before distributing to beneficiaries, confirm with a lawyer where you stand on creditor notice, taxes and any surviving spouse's claim.
• Ask about a CRA clearance certificate before distributing.
• Speak to a lawyer if the estate looks short or if a creditor says you personally owe money.

Frequently asked questions