Who Pays a Deceased Person's Debts in Saskatchewan?

After a death, bills and collection letters can arrive quickly. Many family members worry that they now owe the money personally, especially if they were close to the person or helped with their finances.

In general, a person's debts are dealt with through their estate, not by relatives simply because they are relatives. There are still situations where someone may be responsible for their own reasons. This article explains the basic Saskatchewan approach and where to get advice.

This article covers the law of Saskatchewan.

Debts come out of the estate first

The debts of the deceased are paid from the estate, and they must be paid before any gifts in the will go to beneficiaries. The executor, or the administrator if there is no will, handles this. The house, bank balances and other property in the estate are used to settle what was owed before anything is handed out to beneficiaries.

Not everything a person owned is part of the estate. Land held in joint tenancy with survivorship, bank accounts with survivorship, life insurance with a named beneficiary, and RRSPs or RRIFs with a named beneficiary pass outside probate. Whether a creditor can reach any of those assets in your situation depends on the facts, so ask a lawyer before assuming either way.

The order debts are paid if money runs short

If the estate does not have enough to pay everyone, the order matters. The province sets out this priority for an insolvent estate:

For an insolvent estate, the province recommends consulting a lawyer and, if needed, applying to the court for directions. The executor's out-of-pocket expenses are paid by the estate, and the court can review them.

When someone may still be personally responsible

Some people have their own responsibility for a debt, for example if they co-signed a loan, guaranteed a debt, or shared a credit account or mortgage. How that applies to you depends on the contract you signed and the facts, and the details for spouses, joint holders and co-signers vary, so it is worth confirming your position with a lawyer.

Executors have a particular risk with taxes. If a legal representative distributes assets before getting a Canada Revenue Agency clearance certificate and tax is still owing, they can be held personally liable up to the value of the assets distributed. This is a main reason executors are cautious about paying beneficiaries early.

• Co-signers and guarantors: how this applies depends on the document you signed and your situation, so a lawyer can confirm it.
• Joint account or joint property holders: how the asset passes and who owes what depends on the type of ownership and the contract.
• Executors: personal exposure can arise if assets are given out before taxes are cleared.

How the executor finds and deals with creditors

To give creditors a chance to come forward, a Notice to Creditors (Form 16-48) should be published under section 32 of The Administration of Estates Act once a week for two consecutive weeks in a newspaper nearest the deceased's last residence. The executor should also run a personal property lien search and a judgment registry search.

Taxes are a debt too. A final income tax return is due April 30 of the following year if the death was between January 1 and October 31, or six months after death if it was between November 1 and December 31, and payment is due on the same date. A late return with a balance owing attracts a penalty of 5% plus 1% per full month up to 12 months. If the deceased or their spouse ran a business and the death was between January 1 and December 15, the filing date may be June 15 of the following year, but payment is still due on the regular date.

What to do next

• Do not pay a deceased person's debts from your own money until you know whether the estate can cover them.
• Keep every letter, bill and collection notice, and note the dates they arrive.
• Check whether you personally signed, co-signed or guaranteed any of the debts.
• If you are the executor, do not give out assets to beneficiaries until debts and taxes are dealt with.
• If the estate may be short of money, speak to a lawyer before paying anyone.

Frequently asked questions