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June 20, 2021

Do you really care if you die in debt?

Do you care if you die in debt? According to a recent Sun Life report, roughly 27% of Canadians couldn't care less -- which is bad news if you're one of their creditors and likely worse if you're one of their beneficiaries.

Borrowers face three types of creditors, explains Sun Life's Kevin Press: "Preferred creditors (Canada Revenue Agency is an example); secured creditors (like the bank that’s holding your mortgage loan); and general or unsecured creditors (everybody else)."

Preferred creditors get paid first, followed by secured creditors and then unsecured creditors, he explains. If there aren’t enough assets to pay everyone off, then somebody gets left holding the bag -- and that's certainly not going to be the government.


Let’s say the deceased has enough to pay his or her preferred and secured creditors in full, but has just $50,000 left over to pay off $100,000 owed to general creditors. Those creditors would have to settle for half of what they're owed, Press explains.

The good news is that you won't be on the hook for dad's debts, even if he named you as a beneficiary in his will. If there's not enough to go around, then the estate is considered to be insolvent. Even though debt collectors might give it a try, disgruntled creditors wouldn't be able to collect from remaining relatives.

At least, not unless they were jointly liable for the debt, a guarantor of the debt, or otherwise previously accepted responsibility for the debt, explains Toronto lawyer Saman Jaffery.

But perhaps there's a middle ground here. 

While Stephen Polan, author of the controversial book Die Broke, doesn't advocate running up a string of debts before you die, he does suggest that you spend everything you can get your hands on.

"By choosing to die broke," Pollan writes, "you turn the future from something to fear to something to embrace and rejoice over. Dying broke offers a way out of your current misery and into a place of joy and happiness."

Will you spend until the end? Do you expect to die in debt? Does it worry you?

By Gordon Powers, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...