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What Families Need to Know About Debt After Death

Ali Katz


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, in situations where debt is shared -- for example, jointly owned credit cards or shared student loans -- the 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:

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.  Spouses should obtain and share their credit reports with each other so they are informed about any debt issues that could impact their estates.  If debt will potentially impact adult children, be honest with them about your financial situation as well.

Get advice.  Seek the counsel of a Personal Family Lawyer™ or financial professional on your debt issues and how to resolve them.  Deal with personal debt before it can become a potential issue for your family.

Get organized.  Ideally, all your estate and financial planning documents should be in one place where your family informed about where to find them.  Among these documents should be an updated list of current assets and debts, including financial institution information, account numbers and passwords.

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 alone -- credit cards, student loans, etc. -- will be discharged.  While debt collectors have the right to attempt to collect 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.