Handling the affairs of a deceased loved one can be very difficult. During this emotional time, the family members of the deceased often must make important financial decisions on his or her behalf. The decisions usually include the repayment of debts owed by the deceased debtor, such as: student loans, credit card debt, mortgages, and other financial responsibilities. Relatives of the deceased normally are not responsible for paying the debts of the deceased, despite what creditors would like you to believe.
Are You Responsible for the Debts of a Deceased Relative?
Typically, any debts owed by the deceased will be paid through the person’s estate, regardless of whether or not a will exists; and relatives are normally not responsible for repaying debts if they were not jointly owned at the time of the debtor’s passing.
When someone dies his debts often die with him. Whether you are under an obligation to repay debts of a deceased family member will depend on whether or not you owned any portion of the debt at the time of their debt, or if received a substantial benefit from the debt itself (for example, a loan that was used to pay for your personal living expenses).
Credit Card Debt After Death
A credit card debt will belong to the account holder; unless a relative co-signed on the debt with the deceased, they should not have to repay the deceased family member’s debt. However, in community property states, because property or assets acquired during the marriage are considered to be jointly-owned, a surviving spouse may be liable for any debt.
Generally, a creditor will be out of luck in there is not enough assets in a decedent’s estate to cover all debts. Nonetheless, creditors often go to extreme lengths to collect any and all debts owed to them — even from the deceased – through demands to spouses and other family members. However, any payment on behalf of a deceased is family member is voluntary, not required.
For family members looking to find a count of all debts owed by the deceased, executors of the estate may request the credit card balances of a decedent’s account. The CARD Act included a provision that the issuer has 30 days to provide balances and cannot charge any penalty fees or interest if you or the estate pays off the balance within 30 days after providing the information. If you or a family member feel like you are being unfairly contacted or harassed by over-zealous debt collectors, you may want to consider speaking with a debtor-creditor attorney to help you find out what your rights are under state law.
Mortgage After Debt
Much like credit card debt, mortgage debt will belong to the actual borrower of the mortgage loan. If a surviving spouse was listed as a joint owner on the loan, then he or she will be liable for the loan debt after the death of their spouse. Similar to when a decedent has unsecured debts, a note that is associated with a mortgage will not be forgiven just because the borrower had died. As an alternative, a surviving spouse can decide whether they would like to continue the payments on the note or would prefer to sell the house and pay off the remaining loan.
Life Insurance Policies
A life insurance policy is not part of an estate; instead the proceeds of the policy go directly to any named beneficiary. Therefore, a beneficiary is not obligated to use the proceeds to repay any remaining debts of the deceased.