When we talk about ‘dead lef’ in Jamaica, we are usually discussing the assets left behind and how relatives wage wars over them. Of course, nobody is usually concerned about the unpaid debts that the deceased person may have accumulated and left behind although the truth that every lawyer is likely to share with you is that the ‘dead lef’ fight should not even start until all the deceased personal debts are settled, because debts must be cleared before assets can be distributed.
Whether it is medical bills, a mortgage, taxes, funeral expenses or some other debt, most persons will die leaving behind some unpaid amount that their personal representatives will have to deal with before the beneficiaries can share up the legacy. For some persons, the unfortunate truth is that the debts sometimes exceed the assets so that nothing remains to be shared when the estate is being wound up.
Let us consider some of the major debts that a person may accrue during his or her lifetime and what may happen to them after death. You will note that, for the most part, the debts do not die with the deceased person.
1. Secured debts
The deceased person may be the sole borrower or there may be two or more borrowers under a loan that is secured against property, such as a house or a car. If the deceased person was the sole borrower, then his or her estate may be liable to continue to pay the debt in order to keep the asset. However, in the case of a house, there may be a life insurance policy against which the debt is secured that may be sufficient to settle the entire debt or some portion of it. Otherwise, if there was a co-borrower, and no insurance policy, the surviving owner may be solely liable for the entire debt or jointly liable with the deceased owner’s estate to settle it.
If the debt does not continue to be paid after the deceased person dies, the lender may be entitled to sell the asset in order to recover the debt.
2. Unsecured debts
Debts that are not secured against property belonging to the deceased person simply have to be claimed against his or her estate. Those debts will either be settled willingly by the deceased’s personal representative, if they are accepted, or the estate can be sued to recover them if the debts are not accepted as being due.
If, for example, property taxes are owed by the deceased person in relation to property that forms a part of his estate, whether that asset is being sold to a third party or transferred to the deceased person’s beneficiaries, that transfer cannot be completed until the property taxes are paid.
The fact is that the deceased person’s estate will incur debts when the estate is being administered, whether through the application for the grant of probate or for the grant of letters of administration, which must also be settled before beneficiaries can receive gifts. These debts may include transfer tax, stamp duty, attorney’s fees and executor’s commission, depending on the quality and nature of the assets that form a part of the estate. For example, transfer tax will not be payable if there is no real estate or shares belonging to the estate and executor’s commission may not be payable if the executors choose not to charge it.
The bottom line is that ‘dead lef’ is not synonymous with assets, only, since deceased persons also leave behind debts.
Sherry Ann McGregor is a partner, mediator and arbitrator in the firm of Nunes Scholefield DeLeon & Co. Please send questions and comments to firstname.lastname@example.org or email@example.com.