How do I include a debt forgiveness clause in my Will

Important: While you can include such a clause in the Will to forgive debt, it alone may not be effective if the estate is insolvent or if creditors or other beneficiaries dispute the recovery of debts owed to the estate. A clearer and less disputable approach is to have a separate loan agreement between the parties that expressly provides for the debt to be forgiven on your death. This way, the debt is cancelled by contract upon your death and never forms part of your estate.

The person whose debt is forgiven via the Will is considered a beneficiary of the Will. This person, or their spouse, should NOT act as a witness to the Will, as doing so could void the forgiveness.

Things to note:

1) The clauses provided below apply only within the scope of the Will (e.g. assets worldwide, worldwide excluding certain countries, or assets in Singapore only). They forgive whatever the outstanding amount is at the time of death.

2) A Will cannot override the terms of any existing loan agreement that prevents the debt from being forgiven on death. If such an agreement exists, it may need to be amended for the instructions in the Will to be effective.

3) Forgiving a debt reduces the size of your estate, which affect how much other beneficiaries receive. Consider whether you will want to adjust other gifts to achieve your intended distribution.

In some cases, a Testator (the person making the Will) may have lent money to an individual. If the Testator wishes for the outstanding balance of the debt to be cancelled upon their death, this can be achieved through a Debt Forgiveness Clause in the Will.

It instructs the Executor not to pursue repayment of the outstanding amount still owed after the Testator’s death. This can apply to:

All debts (of any kind) owed by that individual
One specific debt (e.g. a loan) owed by that individual

If you have made, or may in the future make, multiple loans or create multiple debts with the same individual and you are considering whether to forgive some or all those debts upon your death, it is generally better to forgive all debts owed by that person rather than only certain debts. Forgiving only some debts may cause confusion for your executor and beneficiaries as to which debts are forgiven and which remain payable.

There is no need to forgive any debt if you wish the debt owed to you be repaid into your estate.

How to key in

You can insert such clause under the “Other Instructions” section in the Select Clauses page within getArrange platform. The grey boxes below contain the clause wording (please edit in your details accordingly). The blue boxes explain what each clause means.

Forgive all outstanding debts owed by a specific person:

I direct that all outstanding sums of money from any debts of any nature (including any accrued interest) owed to me by my {Relationship}, {Name}, {Identification Number/details}, as at the time of my death, shall be forgiven in full upon my death. I release and discharge him/her from any obligation to repay the outstanding sums. My Executor(s) shall take no action to recover the outstanding sums, and shall mark any signed documents or security relating to the outstanding sums as cancelled to prevent any later claim. For the avoidance of doubt, this does not reduce the share of my estate which he/she is entitled to receive under this Will.

Example:

Alex borrows $50,000 from you on 1 Jan 2024.
Alex borrows another $10,000 from you on 15 Jun 2024.
Alex owes you $5,000 for damaging your car.
In your Will, you instruct to forgive all outstanding debts owed by Alex.
In your Will, you leave Alex a $20,000 gift.

Outcome on your death (assuming no repayment made):

Alex's $50,000 and $10,000 debt is wiped clean.
Alex's $5,000 debt for damaging your car is wiped clean.
Alex is entitled to the $20,000 gift.
Alex will receive a net total of $20,000.

Forgive one specific outstanding loan owed by a specific person:

I direct that any outstanding balance (including any accrued interest) of the debt arising from the loan of {Currency} {Principal Amount} made by me on or about {Date} to my {Relationship}, {Name}, {Identification Number/details}, as at the time of my death, shall be forgiven in full upon my death. I release and discharge him/her from any obligation to repay the outstanding balance. My Executor(s) shall take no action to recover the outstanding balance, and shall mark any signed documents or security relating to the outstanding balance as cancelled to prevent any later claim. For the avoidance of doubt, this does not reduce the share of my estate which he/she is entitled to receive under this Will.

Example:

Alex borrows $50,000 from you on 1 Jan 2024.
Alex borrows another $10,000 from you on 15 Jun 2024.
In your Will, you instruct to forgive one specific outstanding loan owed by Alex (i.e. just the $50,000 loan made on 1 Jan 2024).
In your Will, you leave Alex a $20,000 gift.

Outcome on your death (assuming no repayment made):

Alex's $50,000 debt is wiped clean.
Alex still owes the estate $10,000 borrowed on 15 Jun 2024.
Alex is still entitled the $20,000 gift.
Alex will receive a net total of $10,000.