Debts After Death
originally published by AARP Magazine
What Happens to Your Debts After You Die?
When loved ones pass away there's way too much to handle in a short time: notifying others despite feelings of intense grief; funeral arrangements; living without the departed individual; keeping or dispensing with their possessions; a potential change in income and other financial matters. And this is a just partial list.
There's also the matter of the debts the person left behind, which raises a flurry of questions. Will they be forgiven somehow? If not, how are they to be paid? What if the liabilities exceed the assets? Who is responsible for them, and under what conditions? Will debt collectors come calling? It's complicated but not insurmountable.
(read the full article)
1. The estate should cover most bills
A person's financial obligations are not automatically forgiven once they've died. According to the Consumer Financial Protection Bureau, in most cases, any unpaid debts are covered by the person's estate — the total assets owned at death...
2. Exceptions to the rule
"If the debt is in the decedent's name, the decedent's estate will be responsible,” says Rachael K. Pirner, a lawyer in Wichita, Kansas, who's a fellow of the American College of Trust and Estate Counsel...
3. State law matters
State law may require a spouse to pay certain debts. It may, for example, require the estate executor or administrator to pay an outstanding bill out of property that was jointly owned by the surviving and deceased spouse...
4. Mistakes happen
Fortunately, you don't have to settle things immediately, so take your time to avoid errors. “Generally there is a minimum period in state probate law for creditors to present a claim, or let the estate know they are owed money,” Hewitt says. “On, average this is between three and six months...
5. Debt collectors may understand
What to do if you hear from debt collectors? “Let them know what has happened, and what is being done to sort out the estate,” Hewitt says...
