Are you at risk of inheriting your sibling’s debt?

If your sibling struggles with debt and suddenly passes away, you may be worried about what will happen to their outstanding debt.

Will their creditors reach out to you and expect you to settle it? We found out whether this should be a concern for you, and what you should do in this situation.

Tip: Get your sibling started on debt counselling today. Go to this page and send them the link.

Are you responsible for your sibling’s debt?

According to Ken Brown, director at SME.Tax, your deceased sibling’s estate becomes liable for all the debt, and their assets – if any – will be sold to help settle the debt.

“The only way a sibling can be held liable is if they have signed surety for the debt. If any bills are presented to the family, they can be referred to the executor of the estate. Without surety being signed, there is no legal responsibility for a family member to inherit debt,” says Brown.

In other words, if you signed surety for your sibling when they took out their student loan, you will become liable for this debt if they suddenly pass away. However, if they also have outstanding debt on a home loan, which you did not sign surety for, then you will not be responsible for this.

Double check the credit agreement and make sure that you are, in fact, liable for the debt. In some cases, credit life insurance will kick in and you won’t have to worry about this.

READ MORE: Do you still need credit life cover when you have life cover?

The role of credit life cover

Credit life cover is a financial product that’s usually included in credit agreements when you take out a loan, such as home loan or vehicle finance. Many consumers are unaware that they have credit life cover because creditors don’t discuss its inclusion in their agreements with consumers.

If your sibling or any other family member passes away, their credit life cover will kick in. Make sure you read their credit agreements before taking responsibility for any outstanding debt.

The cost of credit life cover has been capped at R4.50 for every R1,000 owed. However, this legislation was only implemented in 2017, which means that many South Africans who signed credit agreements prior to this time are still paying more than they should. 

You’re legally allowed to swap out your credit life cover for a more affordable option, as long as what’s covered is equal. If you think you or your sibling are paying more than you should, click here to get a quote.