Debt After Death, Information Families Need

Debt Meddygarnet Ccflickr

The poverty rate among seniors is rising, giving rise to the question of whether or not it is possible to inherit debt.  

In general, when a loved one passes, his or her debts fall to the estate to be paid.   However, there are situations where debt is shared. For example, jointly owned credit cards or shared student loan debt can pass to the account co-owner, even if he or she was unaware of the debt. This is why it is important to consider debt planning as part of your overall estate planning process.

Here are some tips on dealing with debt after death:

Get informed.   By law, everyone is entitled to one free credit report every year from the three major credit reporting agencies: Equifax, Experian and TransUnion. We highly recommend obtaining a free credit report and sharing that with your spouse or partner   so they are informed about any debt issues that could impact their estates and visa versa.   If debt will potentially impact adult children, be sure to keep them informed with your financial situation. Be honest with them so nothing comes as a surprise when you pass away. Things will run much smoother if those taking over your estate know exactly what to expect, and have a plan on how to fulfill all necessary transactions on your behalf.

Get advice. Seek the counsel of a Personal Family Lawyer™ or financial professional on your debt issues and how to resolve them. Always try to deal with your personal debt before it can become a potential issue for your family. We want to make sure that your family is covered and taken care of long after you are gone.

Get organized.   Ideally, all your estate and financial planning documents should be in one place where your family can easily find should something happen to you. One of the hardest things for family members is knowing exactly where to find all of the necessary information to take care of the estate.   Among these documents should be an updated list of current assets and debts, including financial institution information, account numbers and passwords. Having this readily available can streamline the process and ensure that nothing is left unsettled.

Get educated .   Heirs should educate themselves about what types of debt will need to be repaid and what may be cancelled or forgiven.   Generally, any unsecured debt held in the deceased person’s name solely — credit cards, student loans, etc. — will be discharged or forgiven. Meaning that those debts will not have to be repaid by your family or your estate when you are no longer here.    While debt collectors have the right to attempt collections on the debt — and may contact survivors to try to “guilt” them into paying — being educated about liability for debts after death will arm you with the knowledge you need to respond appropriately.

The best way to learn about protecting yourself and your family is to talk with us about a Family Wealth Planning Session, where we can identify the best strategies for you to provide for and protect the financial security of your loved ones.

This article is a service of Joel A. Norris, Esq, Personal Family Lawyer®. We don’t just draft documents, we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™ during which you will get more financially organized than you’ve ever been. before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.