When someone passes away in Alberta, their debts don’t vanish. Instead, they’re paid from the estate’s assets before beneficiaries receive anything. Whether you’re the executor, beneficiary, or planning ahead, it’s essential to understand Alberta’s estate debt rules under laws like the Wills and Succession Act and Estate Administration Act.
At Verhaeghe Law, our Edmonton wills and estates lawyers can help clients answer questions about their debts and estate. Contact our law firm today to ensure all debts are handled properly and executors have the legal support they need to avoid personal liability. To get in touch, you can call our Edmonton office at 587-410-2500 or fill out our online contact form now.
How Debt is Paid from an Estate in Alberta
After someone passes, their estate must first pay debts and administrative costs before distributing assets to beneficiaries. This process is guided by strict priority rules and timelines:
- Executor’s Responsibilities and Liabilities: The executor (or “personal representative”) will inventory assets and liabilities and formally notify creditors. They must pay debts from the estate before distributing anything to beneficiaries. Failure to do so can expose them to personal liability. A probate bond might be required if no Alberta-based executor is named or upon request by interested parties.
- Order of Payment: Generally, assets must be used to pay debts in the following order:
- Funeral costs and estate administration expenses, like legal fees or executor fees
- Taxes owed to Canada Revenue Agency and Alberta (including probate fees)
- Secured debts, such as mortgages or car loans, paid from collateral
- Unsecured debts, such as credit cards, lines of credit, or personal loans, paid pro rata if funds are limited
- Joint or Cosigned Debts: It should be noted that beneficiaries of an estate do not inherit debt. The estate covers it. Some exceptions may arise if a debt was cosigned or jointly held. The surviving cosigner may remain liable, and creditors can pursue that individual directly if the estate cannot fully cover the debt.
Alberta-Specific Rules & Time Limits for Settling Debts
Alberta’s legislation imposes strict claim timelines that executors must follow:
- Limitation on Creditor Claims: Under the Limitations Act, creditors generally have two years to make a claim against the estate of the deceased. This period resets if the debtor acknowledges or partially pays a debt.
- Notice and Claim Cutoff: Once the executor publishes the creditor notice under Surrogate Rules, creditors have only one month from the last publication to submit claims. After that, even debts still technically within the two-year time limit may be barred.
- Handling Insolvent Estates (Abatement): If debts exceed the amount of assets an estate has, partial payment or abatement occurs. Estates can use their remaining assets and then proportionately reduce any gifts or residual inheritances to cover their remaining debts.
Handling Debts as an Executor or Beneficiary? Contact Verhaeghe Law Today
In Alberta, debts must be paid by the estate in a clear legal order before assets are distributed to beneficiaries. Executors are expected to follow strict timelines, particularly for creditor claims. When these are not handled correctly, executors can be held personally liable. For families, this process can be emotionally and legally overwhelming.
If you’ve lost a loved one or are named executor of an estate with debts, contact Verhaeghe Law today. Our experienced estate lawyers can guide you through Alberta’s legal requirements, handle creditor claims, and ensure that debts and inheritance distribution proceed lawfully and fairly.
To reach a member of our legal team, call 587-410-2500 or fill out our online contact form now.