Lost a loved one? You are not obligated to pay their debts

Claims should be made against the estate, not against the heirs of the property. PHOTO | FILE

What you need to know:

  • According to Dr Mwimali, it is important to note that while payment of most debts will be deducted from the deceased’s estate; there are some instances such as inheriting a mortgaged house, where the heir has to pay the debt.
  • Unknown to many, it is not compulsory for an individual to accept a bequest left for them as per a will, especially if it is not beneficial.

The death of a loved one is a painful experience. Coping with the death can be extremely hard and is sometimes even more difficult when creditors come knocking.

It is often up to family members to make crucial financial decisions on behalf of the deceased. These decisions often involve choosing possible ways to settle creditor’s claims of debts owed by the deceased. As a result of ignorance and misinformation, many Kenyans find themselves settling debts that they are not supposed to settle.

Dr Jack Mwimali, dean of Jomo Kenyatta University of Agriculture and Technology (Karen Campus)’s School of Law says: “It is usually upon the lawyer with whom the will was registered to come forward and announce that there is a will stating the intentions the deceased had in accordance to the distribution of his estate after his death. Through this announcement, the creditors become aware and can come forward and make their claims.”

Dr Mwimali explains that the claims should be made against the estate, not against the heirs of the property.

“The first priority is to settle the debt and then the remnants of the estate will be distributed among the heirs.”

There are different natures of debts, including mortgage, medical bills, student loan, credit card debts and even burial expenses. The law stipulates which debts get priority in clearance.

“In most cases, the priority debts are the medical bills and anything owned to the government such as tax arrears ,” says Dr Mwimali.

“When the priority debts are paid, consideration is given to whether any of the remaining debts are of a secured creditor, and they are settled next. After that it comes down to the normal channel of debts where people will make their claims against the estate. These are usually the unofficial debts among colleagues and friends.”

MORTGAGED HOUSE

According to Dr Mwimali, it is important to note that while payment of most debts will be deducted from the deceased’s estate; there are some instances such as inheriting a mortgaged house, where the heir has to pay the debt.

Unknown to many, it is not compulsory for an individual to accept a bequest left for them as per a will, especially if it is not beneficial.

Dr Mwimali explains that this is documented in the Doctrine of Election, a common law principle practised in Kenya and other parts of the world. In simple terms, this principle states that you have a choice on whether or not you want to accept a bequest. If you accept the bequest, you take it and all the disadvantages (debts, losses and so on) that come with it. However, if you choose to not be responsible of the disadvantages of a bequest, you reject it altogether and lose its entitlement and right of equity.

“This doctrine can come in handy in a situation where the estate of the deceased is not enough to cover the payment of the debts he had while living,” says  Dr Mwimali. “The inheritors will not make claim to the bequest as it will not be beneficial to them. In such a situation, the estate will be divided equally among the creditors who were owed money.”

“The common mwananchi is not fully aware of his options in regards to the law,” says Dr Mwimali. “That is where the customary practices usually come in, most of which are disadvantageous to the family.”

He adds: “For example, some cultures believe in the pious obligation to pay off a parent’s debt. This means that the heir will pay all the debts that come with inheriting the property. Others choose, for sentimental purposes, to keep the property within the family even if paying off the debts that come with the property leads them to a loss.”

Nevertheless, there are ways to protect your loved ones from having to deal with creditors in the case of your demise. “Insuring your property will protect it from creditors because they cannot make claim against the property. They will have to approach the insurance company, which will settle the debt,” says Dr Mwimali. “One can also have a guarantor of the debts, so the creditors will deal with the guarantor for the settlement of the debts.”

BENEFITIAL INHERITANCE

“It is however important to note that once the insurance company or guarantor pays off the debt, they have rights to claim the property for themselves,” emphasizes the academic lawyer.

Many people are under the assumption that in the case one’s husband or wife dies, the surviving spouse has the responsibility to settle all debts owed by the deceased. This is not the case.

“The Marriage Act of Kenya states that marriage does not affect the right of either spouse to own or dispose of any property other than matrimonial property,” says Dr Mwimali. “So your spouse’s debts are legally not your debts and vice versa unless the property was acquired in the names of the spouses jointly. Simply being married to someone is not reason enough to make you liable to his debts.”

“A mortgage confers the title to the lender,” says Dr Mwimali. “This basically means that the bank becomes the owner of the property and the person receiving the money gets equity.”

He continues, “As the current owner of the house or property mortgaged at the time of the death, if no payment plan is made by those inheriting it, the bank can simply sell the property and allocate itself the money that was owed to it plus the interest gained. The residual amount of money can then be distributed to the entitled heirs of the property in accordance to the ownership interest of the deceased.”