Let’s talk about two things most people avoid: death and debt. It’s crucial to understand what happens to any debts when someone passes away, and how it might impact those left behind. Who’s on the hook for these debts? Can they be passed on to family members? The answers vary, but there are some general rules that can help you understand the possibilities.
When someone dies, their debts don’t just disappear. Sometimes, debt collectors might try to take advantage of grieving family members, insisting they need to pay off the deceased’s debts. If this happens, it’s possible you might be responsible for the debt, but it’s also possible the debt collector is trying to get money from you that you’re not legally required to pay.
Debt collectors have to follow certain laws when trying to collect unpaid debts. For instance, if you tell a debt collector in writing to stop contacting you, they must do so. If they continue to contact you, they’re breaking the law. But remember, just writing a letter might not be enough. Some debt collectors can be aggressive and even break the law. If you’re having trouble with a collector, you can file a complaint with the Federal Trade Commission, Consumer Financial Protection Bureau, or your state attorney general’s office. You can even sue them if they’ve violated your rights.
When someone dies, their debts and assets (known as their "estate") go through a legal process called probate. This process, which varies by state, determines who’s responsible for the deceased’s debts. For example, small estates can often go through a simplified probate process, but the definition of a "small estate" varies by state.
The probate process involves opening the estate, paying off debts and distributing inheritances, and then closing the estate. The person in charge of this process is called the executor or personal representative. They use the estate’s funds to pay off any debts. Only after all debts are paid can the remaining assets be distributed as inheritances.
Generally, the executor uses the estate’s assets to pay off any debts. The deceased’s family members, relatives, or inheritors are not responsible for these debts with their personal property, even if they receive an inheritance from the estate. Only the executor has the legal authority to manage the estate and use its funds to pay off debts.
But what happens if the estate doesn’t have enough assets to cover the debts? This is called an "insolvent estate," and it’s when most problems arise. When an estate is insolvent, some debts have to go unpaid. Creditors might try to get others, like children or other relatives, to repay the debt. This is especially true for joint debts.
There are some exceptions to these rules. For instance, joint debts are the responsibility of both the estate and the surviving debtor. If you and your spouse have a joint credit card account, for example, you’re both responsible for repaying it. If your spouse dies and leaves an unpaid balance, you’re still liable for repaying the debt.
Another exception applies to married couples living in community property states. In these states, both spouses have equal ownership of any property acquired during the marriage, including debts. So, if your spouse takes out a credit card while you’re married and then dies, leaving an unpaid balance, you’re responsible for paying it off.
There are also filial responsibility laws, which allow creditors to pursue a deceased person’s relatives if the deceased left behind medical debt and couldn’t pay it. These laws vary by state, so it’s important to talk to an attorney if you need advice.
Finally, an estate administrator can become personally liable for problems, expenses, debts, or liabilities incurred by the estate if they act negligently or recklessly in their duties.
While it’s possible for you to become legally responsible for someone else’s debt after they die, it’s not very common. What’s more common is a debt collector trying to convince you that such debts are your responsibility. If you’re feeling overwhelmed and need advice, talking to a probate or consumer law attorney is always a good idea.
