The majority of Canadian adults (67%) either don’t know what will happen to their debt when they die, or are misinformed about how their debt will be treated upon their passing, according to a survey of 1,500 Canadians by Lawyers’ Professional Indemnity Company (LAWPRO).
Age and experience aren’t predictors of financial and legal understanding of debt and death issues — 42% of Canadians aged 55+ are misinformed about what happens to their debt when they die, the largest percentage across the demographic groups.
Survey data shows a wide gulf between people who want to leave their families in financial comfort (56%), and those who would like to leave other types of legacies: 12% of people wished to leave a lasting impact on others instead of a financial contribution; 11% wanted their prized possessions left to very specific beneficiaries and organizations, and 3% wanted to leave money to their favourite charity/charities or create an endowment fund.
Two percent of Canadians responded that they have non-traditional ideas for their legacy, including giving assets to friends and providing funds to care for their family pet. Alternately, some planned to simply spend all their money before they died.
Some Canadians had not thought about the legacy they wanted to leave when they passed (15%), while others declared that they felt comfortable passing with debt on the books (12%). A number of people surveyed believe that life and mortgage insurance policies would cover outstanding debt, which alleviated their concerns.
Home owners have greater awareness about what happens to their debts when they die and are more inclined to leave a financial legacy to family, compared to renters. While 37% of home owners understood how their debts would be treated upon their passing, only 28% of renters knew. Furthermore, 62% of home owners surveyed wished to help their families be more financially comfortable upon their death, versus 48% of renters and 30% of people in other living situations.
The survey also showed that 32% of women simply don’t know what happens to their debt when they die, compared to only 24% of men. Overall, men are more informed about how their assets and debt will be dealt with after death, with 37% of men understanding the process, versus 30% of women.
Read: Half of Canadians not paying down debt
Nearly two thirds of Canadians (65%) don’t appreciate the risks of having assets in joint ownership with children or others before their death. Also, one third of Canadians don’t know what happens to loans to children/heirs or others upon their death.
Before sharing assets with a child, parent or relative, a lawyer should be consulted to better understand how ownership rights could be impacted by other debt obligations.
Additional survey findings:
- People with children were more inclined towards leaving a financial legacy — 66% of people with children cited this goal, compared to 53% of people without children.
- When asked what their greatest worry about leaving debt behind after death was, some of the more interesting individual responses were: “dead people don’t worry” and “more worried about being totally broke before I die.”