The article “How to stop debt or pension payments after someone has died” was originally published on MoneySense on May 10, 2021.
Jarnail’s son passed away recently, yet his student loan payments continue to be withdrawn. What should his next steps be?
The difficult reality of losing a loved one is that while you are mourning, there are also financial, legal, and other administrative obligations to manage.
Depending upon the source of the student loan, there may be no repayment requirement, and payments made after your son’s death may be owed back to his estate.
If your son’s loan was a federal student loan, the Canada Student Financial Assistance Act states that “all obligations of a borrower in respect of a loan…terminate if the borrower dies.” The National Student Loans Service Centre (NSLSC) can be contacted in a number of ways.
If the loan was a provincial or territorial student loan, you can contact the applicable student aid office. The Master Student Financial Assistance Agreement for the province of Ontario, for example, states: “obligations…in respect of your outstanding loan balance will terminate upon your death.”
If the loan was from a bank, Jarnail, other debts of the deceased must generally be paid out of the assets remaining in their estate. Those assets could include cash, investments, real estate, personal effects or insurance. Keep in mind that not all assets become part of an estate. Assets that are held jointly or that have named beneficiaries may not form part of a person’s estate.
It is possible for an estate to be insolvent (bankrupt) and have more debts than assets. In this case, there may be provincial legislation to decide the order of repayment for the debts. Debts of the deceased would generally not become the responsibility of their family unless it was a joint debt or there was a co-signor.
Some debts may have life insurance associated with them that pay off the debt upon death.
There may be other parties to contact upon someone’s death, and even payments that an estate or beneficiary is entitled to receive.
A loved one or executor should contact, if applicable:
- Utility companies (where the deceased had services)
- Financial institutions (where the deceased had accounts)
- Insurance companies (where the deceased had policies)
- Canada Revenue Agency (income tax and benefits)
- Service Canada (Canada Pension Plan, Old Age Security, Employment Insurance benefits)
- Provincial health insurance
- Ministry of Transportation (driver’s license)
- Immigration, Refugees and Citizenship Canada (passport, permanent residence card)
A deceased CPP contributor is generally entitled to a CPP Death Benefit of up to $2,500. Here is information on eligibility and how to apply.
A survivor spouse or child may be entitled to a CPP benefit (survivor’s pension or surviving child’s benefit).
A surviving spouse between age 60 and 64 may be entitled to the OAS Allowance for low-income spouses of Guaranteed Income Supplement (GIS) recipients.
Losing a loved one is always difficult. Some of their debts may be cancelled upon their death, while others must be paid by their estate. In either case, loved ones are often tasked with settling their estate, and that can involve paying liabilities and applying for benefits. Although these things should ideally be done relatively soon after death, if someone is mourning and there is a delay, allowances are often made for that, and payments will generally be adjusted accordingly.
Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products whatsoever.