What happens to your debt after death

What about borrowing and dying money? Little is written about this topic. So it’s time to change that. On this page you will find out what about a loan if you or your partner dies. The question what happens to a loan when you or your partner dies is a question few people ask. We assume that you do not want to burden your relatives with a debt and therefore want to know more about this subject. You will also find more information about this subject here. For example, there is the option to insure the debt separately so that it is canceled in the event of an emergency. But there are also several providers who have already included this as standard when providing a loan. A number of conditions must then be met, you can read more about this in this article.

 

Remission or debt acceptance

Remission or debt acceptance

The bank or lender will always recover the outstanding amount of a loan from the surviving relatives. The surviving relatives are obliged to take on the loan if they accept the inheritance. Do they not accept an inheritance? Then they are also not obliged to take over the outstanding loan. The bank or lender will then cancel the debt. For a complete overview of the outstanding debts you can request an extract from the BKR, which shows all the loans that the deceased took out in the Netherlands. On this overview you will find not only any loans, but also debts on credit card, mail order company, customer card (s) and bank overdraft.

 

Reject legacy

If you are afraid that the number of debts exceeds the assets, you can consider rejecting the inheritance. You then do not have to pay any of the outstanding debts, but you can also no longer claim any money that remains after the installment. If the deceased appears to be wealthy, then you cannot undo this choice. So think carefully about this before you make this decision. If you still want to reject the legacy, you have to go to court. You have to do this within 3 months after the death and the costs are around 120 euros. Note: This cannot be undone later.

Certificate of inheritance

Certificate of inheritance

You will probably need a certificate of inheritance in order to request an overview from the BKR. You can get this at a notary. There are costs associated with this that can still run nicely, so compare a number of notaries by price. This is all you have to pay attention to, because the same paper is handed over to all notaries. Since the costs for a certificate of inheritance can go up to 1000 euros, it seems a good idea not to take the first one randomly.

Accept less risk with beneficiary

If you are not sure about the number of debts that can be in the legacy, then a good second solution is the so-called beneficiary accepting the legacy. All assets of the deceased are first sold, then all outstanding debts are paid with this capital. The money that remains then will be paid to the beneficiaries. The advantage is that if the assets do not yield enough to pay off all debts, this will not be passed on to the heirs. These remaining debts will then be canceled.

What about study debt

What about study debt

In the Netherlands, everything that has to do with finance and studying is arranged by DUO (Education Implementation Service). They adopt a lenient approach in the event of death where there is still a debt outstanding. All outstanding debts are canceled. If the deceased lived in the Netherlands, you do not have to take any action, the municipality handles this and reports this to DUO. 

Whether or not a will

Of course important to determine whether or not you are heir. If a will is made, this is immediately clear and the notary will indicate who may call himself an heir. If there is no will, you can easily determine this yourself, as there is a sequence in 5 steps.
1. Spouse, registered partnership, children.
2. Parents, brothers and sisters.
3. Grandparents
4. Great-grandparents
5. Dutch state
As you can see in the overview above, nephews, nieces, aunts and uncles are not included in this list. So when there is no will, they cannot claim anything. Here you can read how you can ask if there is a will. This must always be done by a notary or a candidate civil-law notary, who then requests this in the Central Testament Register, where all testaments made in the Netherlands are registered. There are costs involved.

Prevent better than cure

Prevent better than cure

Do you want to prevent your relatives from being burdened with a debt? Then you can take out insurance on most loans. With this you insure a loan in the event of death. How it works? This special life insurance policy will pay out a sum of money in the event of death with which the loan can be repaid. So no debt remains open. If you have taken out a loan of 50,000 euros a few years ago and if you suddenly die, 25,000 euros of this is still outstanding, the remainder (ie 25,000 euros) will be repaid in full with this insurance.

What does such insurance cost with a loan?

What does such insurance cost with a loan?

What are the costs of a term life insurance that you can take out with a loan? This of course differs per bank and lender. You pay a monthly premium for this, but you may also pay a one-off brokerage fee if you arrange for this to be arranged by the bank or lender. Remember that it is not mandatory to take out such insurance! And perhaps you have already taken out a life insurance policy, for example together with your mortgage. In that case, ask the insurer whether you can also have the new loan insured with them on the same policy.

Loan is automatically insured

Loan is automatically insured

In certain cases, loans from banks and lenders are insured as standard in the event of death. In that case, you pay slightly more interest because these costs are added to the loan. The loan contract always clearly states how a loan is structured and what you are going to pay for.

Take out individual life insurance?

You cannot insure yourself against death at certain banks / lenders. In that case, we recommend that you simply take out a separate term life insurance policy. With many insurance companies you can take out such insurance with a loan. Often, with a separate insurance policy you are also a bit cheaper. With a separate life insurance policy the surviving relatives receive an amount in the event of death. This amount has been agreed in advance. You cannot link the amount of money to a loan, but you can of course pay off the remaining debt with the payment of the insurance that you receive in the event of your death.

Steps to be taken in the event of the death of a loved one

Finally, an annoying subject, but for the sake of clarity in this article, the steps to be taken in the event of the death of someone dear to you. This way, this is done in a way that takes a lot of thought and puzzle off your hands. Below the checklist.
✓ Request the death certificate
✓ Request the deed of inheritance
✓ Request data from BKR
✓ Consult with notary about the inheritance
✓ Check whether there is a life insurance policy
✓ Arrange funeral and possible financing

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