You may wonder what will happen to your debt after you die. Will your family be stuck with it? Would what you owe truly be the legal responsibility of your loved ones? Learn who — and who will not — be liable for any debt you owe after you die. Below are answers to questions our clients often ask:
What happens to my debt when I die? Will my family be stuck with it?
Typically, your estate owes the debt. If there are enough assets to cover your outstanding debts, an executor or administrator (the person who manages the probate process and is responsible for paying the creditors) must sell them to pay your creditors. If there isn’t enough money in the estate to pay the debt, the creditors typically take the loss. However, there are cases where your family members may be responsible.
Will my spouse be responsible for our home mortgage or home equity loan after I die?
A federal law states surviving spouses can take over a mortgage on a home without having to immediately pay the remaining balance in full practically speaking. If your spouse plans to continue ownership, he or she will simply continue making the monthly payments.
What happens to my other debt, such as credit cards and auto loans?
If you die and have credit card debt, or still have payments to make on your vehicle, the remaining balances will be paid through your estate. However, if your spouse co-signed on either your credit card or your auto loan, he or she will be legally responsible for repaying the debt. Note: Simply authorized users on credit cards won’t be responsible for unpaid charges and interest, unlike co-signers.
Will someone owe my medical debt?
Various factors affect who is ultimately responsible for your medical debt. It can depend on whether you were on Medicaid or if you had a family member living with you providing care. Nearly 30 States require adult children to repay medical debt that an estate is not able to cover, although Florida is not one of them.
Which of my assets are safe from debt collectors?
In most cases, accounts with beneficiaries such as IRAs, 401(k)s, brokerage accounts, insurance and employer-based pension plans won’t go through probate, so they won’t be used to pay your debts. Keep in mind that with most assets, where a beneficiary is listed, protection is given.
Debt Collectors After Your Death
Unfortunately, deceptive debt collectors may pursue your spouse for your unpaid debts after you die. Often, surviving spouses may receive calls saying the debt still needs to be paid. Unless there’s a true legal basis for contacting a survivor, debt collectors should not be intimidating your spouse through any form of contact. If this happens, he or she should send a letter to the company via mail, asking them to stop all communications.
3 Ways to Protect Your Family From Your Debt In Case Of Your Death
- Make sure all of your beneficiaries are up-to-date. This will ensure those assets are protected and go to the correct individual or organization.
- Have adequate life insurance. Life insurance, beyond going to a beneficiary, can go against debts and other end-of-life obligations.
- Talk to your family members about your debt situation so they will be prepared in the event of your death.
If you have questions about what other types of debt will — or will not — be the responsibility of your family after you die, or you want to discuss your financial situation with an experienced debt attorney in South Florida, contact Klein Law Group at 561-220-6659 or fill out this contact form. Our firm offers a free 30-minute consultation to discuss your individual situation.