When You Die Do Your Debts Die with You?
Unfortunately, when you die, your debts don’t die with you. It is important that your debts are paid off before your death, or your assets can be claimed by your creditors before your heirs can get anything. If you own property at the time of your death, your property will become part of your estate. Anything you bought through a secured debt can be repossessed after your death. Your home, cars, boats, and any other type of property will become part of your estate when you die. The creditors can take your estate to pay off your debts, and if your estate isn’t enough to cover your debt, your family may or may not be left holding the bag. The probate courts cannot distribute your assets until all your outstanding debts have been paid.
Many people, as they get older want to get out of debt. They don’t usually want to have lots of credit card debt, because that debt will have to be paid after your death. If you have a joint account on a credit card, and you die, the other person still remaining on the card will be responsible for paying off the entire credit card debt. If you have other authorized users of your credit cards, but they are not on the actual financial contract, then they will not be liable for the debt. Anyone who isn’t a co-signer or isn’t on a credit card contract won’t be held responsible for any debt, although, collection agencies may hound you, if they have contact information on you. If your name isn’t on any contract, you shouldn’t have to worry about the collection agencies, but any outstanding debt will need to be paid out of the estate before the heirs get their share.
You may have good intentions by leaving a will for your family members to receive your assets when you die. However, if the amount of your debt exceeds the value of your estate, then your heirs won’t receive anything from your will. If any debt is owed to the IRS, that debt will have to be paid before your estate can be claimed by your heirs.
It costs lots of money to have a funeral. If you have borrowed against your life insurance policy, it is important that you pay it back before you die. Someone will have to pay for your funeral expenses, and if there is viable insurance and you die poor and without life or burial insurance, your family may be passing a cup around to collect money to pay for your final expenses.