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Debt and death, who owes what when a loved one dies?

On Behalf of | Sep 11, 2016 | Estate Planning And Probate |

Very often when there are conversations about estate planning, the talk revolves around the inheritance following a person’s passing. Who will get the financial savings acquired during the person’s life? Who gets the real estate? Who gets the family heirlooms? How will a business be handed down or managed?

It is somewhat surprising that more discussion isn’t about the inheritance of something less thrilling: debt. It’s surprising because, according to the Federal Reserve, there is more than $12 trillion in combined household debt in the country. That’s a big number; that’s a lot of debt that could be left behind to be handled through the probate process

This is just the first of multiple posts that will discuss certain debts and how they are handled after the debtor dies. There are various kinds of debt, and a very popular type of debt comes from credit cards. 

If your loved one dies and leaves behind credit card debt, creditors can and will try to collect from the value of the estate. If there is not enough left of the estate to pay that total credit card debt, you and your family members generally would not have to come up with the remaining balance.

It is important to emphasize, however, that a loved one might still be required to pay the balance of a credit card debt if they co-signed for the card. A co-signer is different than an authorized user. Parents of college students might co-sign for a credit card. If their child dies, the parents will still owe the debt. The same goes for a spouse who co-signed on a credit card. If their spouse dies, the co-signer will owe the balance of debt. 

The matter of credit card debt is just one of many topics that you should talk to an estate and probate planning attorney about. Understanding how debt works into an estate plan can relieve unnecessary stress once the probate process begins. Knowledge and support can also provide you a sense of power when creditors attempt to collect debt that you actually shouldn’t have to pay.


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