What Happens to Each Type of Debt
| Debt Type | Who Pays? | What Happens |
|---|---|---|
| Credit card (sole holder) | Estate | Paid from estate assets; remainder written off |
| Credit card (joint holder) | Surviving joint holder | Full balance becomes their responsibility |
| Credit card (authorized user) | Estate | Authorized user NOT liable |
| Mortgage (sole) | Estate (sell property) | Estate sells property or heirs assume mortgage with lender approval |
| Mortgage (joint, with survivorship) | Surviving owner | Mortgage stays with surviving co-owner; property transfers automatically |
| Car loan (sole) | Estate | Estate pays or returns vehicle |
| Car loan (co-signed) | Co-signer | Co-signer responsible for remaining balance |
| Student loan (federal/provincial) | Written off | Canada/provincial student loans forgiven on death |
| Student loan (private, co-signed) | Co-signer | Co-signer responsible |
| Line of credit (sole) | Estate | Paid from estate; remainder written off |
| Line of credit (joint) | Surviving holder | Full balance becomes their responsibility |
| Income tax owing | Estate | Must file final return; estate pays taxes owing |
| CERB/CRA overpayment | Estate | Deducted from estate; remainder may be forgiven |
The Estate Settlement Process
| Step | Action | Timeline |
|---|---|---|
| 1 | Notify financial institutions of death | Immediately |
| 2 | Obtain death certificate copies (5–10) | 1–2 weeks |
| 3 | Apply for probate (if needed) | 1–4 months |
| 4 | Executor inventories all assets and debts | 1–2 months |
| 5 | Publish notice to creditors (recommended) | Must wait ~60 days |
| 6 | File final tax return (due April 30 or 6 months after death) | 2–6 months |
| 7 | Pay all valid debts from estate assets | After creditor notice period |
| 8 | Distribute remaining assets to beneficiaries | After all debts paid |
| Total timeline | — | 6–18 months |
Priority of Debt Payment from Estate
| Priority | Debt Type | Notes |
|---|---|---|
| 1st | Funeral and burial costs | Up to reasonable amount |
| 2nd | Estate administration costs | Executor fees, legal, accounting |
| 3rd | Secured debts (mortgage, car loan) | Paid from the secured asset |
| 4th | CRA debts (income tax, HST) | Federal/provincial taxes owing |
| 5th | Preferred creditors | Employee wages (if business owner) |
| 6th | Unsecured debts (credit cards, LOC, personal loans) | Pro rata if insufficient funds |
| 7th | Remaining assets to beneficiaries | Only after all debts paid |
Assets That Are Protected from Creditors
| Asset | Protected? | How |
|---|---|---|
| Life insurance (named beneficiary) | Yes | Bypasses estate, goes directly to beneficiary |
| RRSP/RRIF (named beneficiary) | Yes | Direct to beneficiary, not estate asset |
| TFSA (named beneficiary) | Yes | Direct to beneficiary |
| Jointly held property (right of survivorship) | Yes | Passes automatically to survivor |
| Pension with survivor benefit | Yes | Goes to named survivor |
| CPP/OAS death benefit | Partially | $2,500 CPP death benefit goes to estate |
What the Executor Should NOT Do
| Mistake | Why It’s a Problem | What to Do Instead |
|---|---|---|
| Pay debts with personal funds | You are NOT personally liable for the deceased’s debts | Pay only from estate assets |
| Distribute assets before debts settled | Executor can be personally liable to creditors | Wait until all debts confirmed and paid |
| Ignore CRA filing requirements | CRA can hold executor personally liable | File all required returns |
| Pay one creditor before others | Must follow priority; unsecured creditors get pro rata | Consult estate lawyer |
| Close bank accounts too early | Need estate account for ongoing payments | Keep estate account open until settlement complete |
Provincial Differences
| Province | Joint Tenancy Rules | Probate Threshold (no probate needed) | Probate Fee |
|---|---|---|---|
| Ontario | Right of survivorship for joint tenants | $0 (always recommended) | 1.5% over $50,000 |
| BC | Right of survivorship | $25,000 | Varies by value |
| Alberta | Right of survivorship | $0 (small estates streamlined) | $525 max |
| Quebec | No right of survivorship (civil law) | Notarial will = no probate | Varies |
| Manitoba | Right of survivorship | $10,000 | $70 flat fee |
| Saskatchewan | Right of survivorship | $25,000 | 0.7% |