Terminally Ill With Debts: Sorting Them Before You Go

Most of what you owe will not follow your family. Debts in your sole name — a credit card, an overdraft, a personal loan, a catalogue account — are claimed from your estate after you die, and where the estate cannot cover them the shortfall is normally written off. Nobody inherits them. Your wife does not become liable because she was married to you, and your children do not become liable because they are your children.

So if you are terminally ill and wondering how to sort out your debts before you die, the task is not to clear everything. It is to identify the few debts that genuinely land on someone you love, deal with those, and stop yourself spending your last months paying down balances that were never going to reach them anyway.

There is a second half to this, and it is the part people most often do not know about. If you hold a life policy, it may contain a terminal illness benefit that can pay out now, while you are still here to say where the money goes. That changes what is possible considerably, and it is worth checking before you make any other decision.

Start here: what follows your family and what does not

Sort every debt you have into three piles. Almost everything that matters follows from which pile a debt sits in.

Pile one: yours alone. Accounts in your sole name, unsecured. Credit cards, store cards, overdrafts, personal loans, buy now pay later balances, unpaid bills. These are claims against your estate. Your executor pays them out of what you leave, in a set order, after the funeral and the costs of administering the estate. If there is not enough, the creditors share what there is and the rest goes unpaid. Nobody living is asked to make it up.

Pile two: shared or guaranteed. Joint mortgages, joint loans, joint overdrafts, and anything a family member personally guaranteed. These do not behave like pile one at all. A joint borrower is liable for the whole balance, not half of it, and your death does not reduce what they owe by a penny. A guarantor is liable under their own separate promise. If your wife guaranteed a business account, that guarantee survives you — the same principle set out in our page on trade credit accounts backed by a personal guarantee.

Pile three: secured on something. A mortgage, a car or a van on finance, anything with goods pledged against it. The lender can look to the asset. Whoever wants to keep the asset has to deal with the debt, and whoever does not want it needs to know they can usually hand it back rather than inherit a payment they cannot make.

One category people get wrong: an additional cardholder on your credit card is not a joint borrower. They used your account, but the debt is yours, and it is yours alone when you die. If a relative has been told otherwise, the position is explained in whether an additional cardholder owes the balance.

Tell your lenders, and what they can actually do

This is the step people put off, and it is the one that changes the most. Every regulated lender in the UK has a process for customers who are seriously ill, and the difference between telling them and not telling them is substantial.

What firms can do, and frequently will:

• Freeze interest and charges, so the balance stops growing while everything else is going on.
• Stop collection and enforcement activity, including calls and letters, and move the account to a specialist team so you are not explaining yourself to a new person each time.
• Write off a balance entirely. This happens more often than people expect with modest unsecured debts where there is clearly no prospect of repayment. Nobody can promise it, and it is a decision for each lender, but it is worth asking for directly and in writing.
• Accept a token payment or no payment for an agreed period rather than treating it as a default.

Ask for a written confirmation of anything agreed. Not because anyone is likely to go back on it, but because your executor will need to show it later, and because you should not have to hold it all in your head.

In England and Wales there is also a statutory Breathing Space, which pauses most interest, fees and enforcement action for a fixed period while you get advice. It is accessed through a debt adviser rather than applied for directly. Citizens Advice, StepChange and MoneyHelper are all free, and none of them sells anything.

Source: Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020, published at legislation.gov.uk.

If you are finding the calls themselves hard, Macmillan Cancer Support and Marie Curie both have benefits and money advisers who will do a great deal of this on your behalf.

What to settle, what to freeze, and what to leave alone

The instinct is to clear the decks. Resist it long enough to think about where the money is coming from and where it would otherwise have gone.

Settle, if you can: anything in pile two. Paying down a joint loan or a jointly held card reduces a real burden on a real person who will still be here. Money spent here is money that stays with your family.

Freeze, and leave: most of pile one. If you use savings that would otherwise have passed to your wife to clear your own credit card, and your estate would have been unable to pay that card anyway, you have taken money from her and given it to a lender that would have written the balance off. That is a real loss, and it happens constantly because it feels like the responsible thing to do.

Handle carefully: anything secured on the family home. Do not stop paying a mortgage without speaking to the lender first, and do not assume it will be written off, because it will not be.

Two warnings, both said plainly because you deserve straight answers. Do not take out new credit that you do not expect to repay; that is fraud, and it can be pursued against your estate and can cause your family real trouble. And do not give away assets or move money in order to keep it from creditors: where an estate turns out to be insolvent, transactions made beforehand can be unwound, and your family would be left dealing with that instead of grieving.

Free advice before you make any of these decisions is genuinely worth the phone call. What looks like an obvious payment often is not.

Terminal illness benefit: money while you are still here

Many life insurance policies include a terminal illness benefit. Where it applies, the insurer pays the sum assured early rather than on death, which means the money arrives while you can still direct it.

The usual conditions are these. A doctor — normally both your consultant and the insurer's chief medical officer — must confirm that the illness is expected to lead to death within twelve months. There must be enough of the policy term left, because most policies exclude a claim in the final stretch before the term ends. And the policy has to include the benefit in the first place: it is standard on most term assurance, but it is generally not included on guaranteed acceptance over-50s plans, and it varies on whole of life cover.

Two things to be clear about. First, the policy ends when the terminal illness benefit is paid. There is no second payment on death, so this is the same money arriving earlier, not extra money. Second, nobody can promise a claim will be accepted; it depends on the policy wording and on medical evidence, and insurers do decline claims that do not meet the definition.

Where the policy is written in trust, the payment goes to the trustees for the beneficiaries rather than to you. That is usually a good thing, but it means you cannot use it to clear your own debts, so check before you plan around it. Our page on whether life insurance ever pays out before you die goes through the mechanics in more detail.

To find out, dig out the policy document or the annual statement, look for the words "terminal illness", and then telephone the insurer directly. Do not go through a comparison site and do not wait for someone else to do it. If you cannot find the paperwork, the insurer will trace the policy from your name, date of birth and address.

Making sure the money goes where you want it

Once you know what will exist, you can point it at the right people. Four things do most of the work.

Make a will, or check the one you have. Without one, the intestacy rules decide, and they do not recognise an unmarried partner at all. If you are not married, this is the most urgent item on this page: see what happens when an unmarried partner dies in debt.

Complete an expression of wish for every pension. Pension death benefits are usually paid at the scheme's discretion and sit outside your estate, which also means they are usually beyond the reach of your creditors. An out-of-date nomination form naming a previous partner is one of the most common and most painful mistakes there is.

Check whether life cover is in trust. A policy paying into your estate is available to your creditors like any other asset. A policy in trust pays the named beneficiary directly, usually far faster than probate, and your creditors cannot touch it. If you have debts, that distinction is not a technicality.

Think about who can access day-to-day money. A joint account normally passes to the survivor immediately, while a sole account is frozen the moment the bank is told. A power of attorney ends at the moment of death and cannot be used afterwards, which catches families out badly — see what happens when a card is used under a power of attorney after the donor has died.

The list that saves your family months

If you do nothing else from this page, do this. Write down every financial thing you have, and where it is. Not the passwords — sharing those breaches most banking terms and can cause its own problems — but the existence of each account and who holds it.

• Every bank, savings and credit account, with the provider and rough balance.
• Every pension, including old workplace schemes from jobs you left decades ago.
• Every insurance policy, with the insurer and the policy number, and whether it is in trust.
• Any debt you have deliberately left, with a note of what was agreed and with whom.
• Anything anyone has guaranteed for you, or that you have guaranteed for anyone else.
• The name of your solicitor, accountant or adviser, and where the will is kept.
• Subscriptions and direct debits, which otherwise keep running for months.

Keep it with the will, and tell one person where it is. Families routinely spend six months and several hundred pounds of professional time reconstructing something that would have taken you an hour on a bad afternoon.

It is also worth turning the question round while you still can. If your partner has no cover of their own, and their income is what the household will run on after you have gone, that gap is now the family's biggest financial risk rather than yours. Cover for them depends on their age, health and underwriting like anyone else's, and no one can promise an insurer will offer it — but it can be looked at, and you can get life insurance quotes and have an FCA-authorised broker go through it with them. For the person who will be left, the companion page is sorting out your own position when your husband is terminally ill.

Scotland and Northern Ireland

The core position on debt is UK-wide. Sole debts are claims against your estate, relatives are not liable simply by relationship, and joint and guaranteed borrowing follows the living person who signed. What differs is the machinery.

In Scotland, estates are administered through confirmation rather than a grant of probate, and Scots law governs the order in which debts are paid. There is no Breathing Space scheme as such; instead Scotland has its own statutory moratorium on debt enforcement, applied for through the Accountant in Bankruptcy with the help of an approved money adviser, and its own Debt Arrangement Scheme for repaying debt over time. Scotland also gives a surviving spouse or civil partner and any children prior rights and legal rights in the estate, which apply to what remains after the debts. If you are in Scotland, take Scottish advice on your will as well: the rules on disinheriting a child are not the same.

Northern Ireland has its own estate administration legislation and its own probate office within the courts service, and there is no equivalent of the England and Wales Breathing Space scheme. Free debt advice and bereavement guidance for Northern Ireland is published at nidirect.

Wherever you are, Marie Curie runs a free support line covering practical and financial questions at the end of life, and there is more on the wider subject in our guide to debt, credit and finance after a death.

Frequently asked questions

What should I do about my debts after a terminal diagnosis?

Tell each lender. Firms have specialist teams for customers who are seriously ill, and can freeze interest, pause collection activity or write off small balances. Ask for everything in writing, list every account you hold, and get free advice from a debt charity before you make decisions about what to pay.

Will my family have to pay what I owe?

Not debts in your sole name, which are settled from your estate with any shortfall normally written off. What does follow them is anything held jointly or guaranteed by them. Identifying those accounts now, while you can still explain them, is the most useful thing you can do.

Can a life policy pay out before I die?

Many policies include a terminal illness benefit that can pay the sum assured early where a doctor confirms a life expectancy of less than twelve months and enough term remains. Check the policy document for the exact wording and conditions, then contact the insurer directly.