Cebile Zibi | What happens to your debt when you die

Most of us think of debt as a today problem: the instalment that leaves on the 25th, the card balance that never quite clears. Few of us think about what happens to it when we're no longer here. Debt doesn't disappear when you die but becomes an issue your family has to resolve, often at the worst possible time.

Data from the South African Reserve Bank reveals that household debt reached 62.2% of annual disposable income in the first quarter of 2026, with debt servicing costs at 8.4%. The Reserve Bank’s findings are supported by the Eighty20 and XDS Credit Stress Report which shows that 41.8% of credit-active South Africans are in default on at least one credit agreement, meaning they are three months or more behind on repayments.

Older South Africans are not immune. Eighty20 found that Comfortable Retirees (defined as older, high-income, credit-active, asset-rich individuals) held R22.3 billion in overdue balances at the end of 2025, while its lower-income senior segment, Humble Elders (defined as low-income, older grant recipients), also recorded rising defaults. Together, these older consumers took out about 840,000 new loans in just three months. Many are carrying debt into retirement, and some are still adding to it.

Who pays your debt when you die

In South Africa, your debts are generally settled from your estate before your beneficiaries receive anything. Your estate’s executor identifies what you owe, notifies creditors, and pays any valid claims. What remains is distributed to your heirs.

For families, this has several practical consequences. Every rand used to settle a bond, vehicle finance, personal loan, credit card, or store account is a rand your family doesn't receive. If there isn't enough cash in the estate, the executor may have to sell property, vehicles, or investments to pay creditors. If you die with a bond outstanding and no plan to settle it, your family may face a choice between taking over the repayments or losing the home.

The distribution of the estate can be delayed while creditors' claims are dealt with, leaving dependants without access to funds when they need them most.

If you were married in community of property, a surety for someone else's debt, or a co-signer on a loan, your spouse or co-debtor may remain liable.

Retirement fund death benefits and life policy proceeds paid to nominated beneficiaries are often treated differently from other assets. The rules depend on the product and circumstances, which is exactly why they need to be understood before they are needed.

Why this matters more as you approach retirement

Retirement usually means a fixed or declining income. Debt that felt manageable on a salary can become heavy once that salary stops, especially if you are also supporting adult children or ageing parents. Borrowing to bridge the gap is understandable, but it can quickly erode the capital you're relying on to last 20 or 30 years.

Carrying debt also puts pressure on the very things designed to protect your family. Money used to service loans can't be used to maintain life cover, and a policy that lapses because it became unaffordable leaves your dependants with less protection at the point when your estate is most likely to be under strain.

Debt, estate planning, protection and retirement are one conversation

Debt, estate planning, protection and retirement planning are closely connected. Debt affects what your family inherits, your will ensures your wishes are carried out, protection can help settle debts and support your family, and retirement planning helps ensure you can live on your savings without relying on credit.

A change in one area can affect the others. Paying off a bond could free up cash for insurance, while adjusting your retirement income could reduce the need to borrow.

This is where a financial adviser can add value. By looking at your full financial picture, they can help you prioritise debt, ensure your will, beneficiaries and cover work together, determine the right level of protection, and build a retirement income that lasts. The earlier you have this conversation, the more options you have. The good news is that it’s never too late to improve the position you leave behind.

Practical steps to start now

List every debt, including bonds, vehicle finance, credit cards, store accounts, personal loans and any surety you have signed. Your aim is to be debt-light by retirement. Prioritise the most expensive debt first.

Avoid new credit to fund day-to-day living without first getting advice. Review your will and beneficiary nominations regularly, especially after life changes.

Finally, speak to a financial adviser about how your debt, protection, estate, and retirement plans fit together.

Nobody wants to think about dying in debt, but the real risk lies in not thinking about it at all. A little planning, and the right professional guidance, can mean the difference between leaving your family a legacy and leaving them a liability.

*Cebile Zibi, Head of Trade Marketing at Momentum Advice.