If you would like to learn more about who should be paying for a deceased person’s debt, continue reading and give our skilled Butler County estate planning & probate attorneys a call today.
Who can be held responsible for paying the debt?
Note that most debt does not just vanish after the debt holder passes away. Usually, a deceased person’s estate is accountable for paying their debts. After an individual dies, they are known as a “decedent.” Their “personal representative” will distribute the decedent’s assets in accordance with the terms of a will or, if the decedent had no will, state “intestacy” laws. The personal representative may be specified in a will or, if there is no will, by the court.
Before allocating any remaining property to heirs and beneficiaries, the personal representative pays off debts if there is not enough money in the estate to cover debts the property may be liquidated (sold for cash) in order to complete payments.
Keep in mind that some property is deemed “exempt,” which implies that debt collectors cannot attain it. In many instances, life insurance policies and retirement savings fall into this category. Additional exemptions differ from state to state. With an experienced estate planning attorney on your side, you can feel more comfortable understanding and choosing the status of your loved one’s possessions.
Are there any exceptions?
A deceased person’s estate is typically liable for the person’s debts, though there are a few important exceptions.
1. Joint Account Holders
Recognize that two or more people can jointly hold bank accounts and credit lines. The holders of the account share responsibility. In the event that one holder passes away, the other holders are liable for any related debt. Because of this, jointly held credit card debt is one kind of debt that you will be accountable for if a co-holder dies.
Also, keep in mind that there is a distinction between an account holder and an authorized user. An authorized user can use an account but is not accountable for any liabilities. On the other hand, an account holder is responsible for his or her liabilities.
If an individual borrows money, rents an apartment, or takes on another financial obligation, they may be instructed to have a cosigner. This supplies added confidence that the primary signer’s responsibilities will be carried out. If the primary signer does not keep up with their obligations (for instance, when they pass away), the cosigner is on the hook for the outstanding debt.
3. Spouses in Community Property States
In some states, property owned by a married couple is referred to as “community property.” Typically, this indicates that each spouse, with some exceptions, has equal ownership in all property obtained during the course of the marriage. The result is that any debt obtained during the marriage remains the responsibility of the surviving spouse.
In the United States, there are nine community property states, including Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Give our legal team a call today to learn more about how we can help you.