Generation to generation debt
December 20, 2006 7:39 AM   Subscribe

Is family debt passed on from generation to generation anymore?

We have a family member (father) who has gotten himself in some crazy debt. We're considering our options for dealing with this debt, but meanwhile the question has crossed our minds: does a non-immediate family member's (not living in your household) financial obligations pass on to their offspring should they pass away?

Anecdotally I recall this being an old tradition but I have no idea if this is a practice today.

Legally, we're bound by Canadian common law.

Does anyone have experience with this sort of situation?
posted by iTristan to Law & Government (7 answers total) 1 user marked this as a favorite
If this works similarly to US and UK debt law, debt is settled from the estate of the decedent. Any joint debt (co-signed) is obviously passed down to the surviving party.

I haven't found anything definitive, but it appears Canada is bound by the same spirit of law.
posted by empyrean at 7:49 AM on December 20, 2006

no, but you have to apply the assets of the estate towards the debt
posted by caddis at 7:50 AM on December 20, 2006

IANAL, but I'm fairly certain debt can only be passed on to spouses.

I think the general procedure is that if there is debt outstanding, the person's estate is auctioned off until the debt is paid for or there is nothing left.

Problem being that if there was anything that your father was trying to pass on, he'd better give it you now. There are some forms of annuities and life insurance that also avoid probate, so that's something to talk to your insurance agent about.
posted by PandemicSoul at 7:52 AM on December 20, 2006

Best answer: See also
posted by deadmessenger at 7:56 AM on December 20, 2006

No. The debtor's estate is liquidated to pay of the debts. IF the estate isn't enough to pay the creditors, tough, they lose.

The problem is that if you and your family are still living in your dad's house, there could be a problem if the house has to be sold. Estate planning is insanely complicated when you start to consider insurances, types of debt, death benefits, etc. Talk to an estate planner and talk to an estate lawyer (who may or may not be the same person).
posted by Pastabagel at 8:35 AM on December 20, 2006

In the previous thread on the issue, pay particular attention to robhuddles' advice.
posted by MrMoonPie at 9:38 AM on December 20, 2006

Response by poster: Excellent, thanks all. We just needed confirmation of what we thought would be the case.

The suggested reading was helpful too.
posted by iTristan at 10:13 AM on December 20, 2006

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