When someone dies, their debt does not simply fade away, instead, it is passed on. But to whom? Generally, the responsibility of paying the owed money will belong to the deceased person’s estate. However, there are a few exceptions from this when a relative might be held responsible.
In the following, we will take a closer look both at the general case and some exceptions of who will be named responsible for your unpaid debts after you die.
The Deceased Person’s Estate
In most cases, the responsibility of paying off any debt of a deceased person falls on their estate. The person who was deemed the executor of the estate will have to manage the financial part. In case there is no will left behind, the estate’s administrator will deal with such issues.
However, there might be situations when the estate cannot provide sufficient funds to pay off debt. If the assets and money held are not enough to cover the whole sum, then the remaining debt will probably be erased. Also, a person might not have an estate, to begin with, in which case the debt will most likely cease to exist as well.
Exceptions
The most common exception from the general rule is a joint account or a co-signer for the loan. In these cases, the person still alive will take on the financial obligation of the deceased.
But in any case, if you have been contacted by a debt collector or anyone else, regarding a deceased person’s debt, it is best to contact a lawyer who is specialized in this field. They will help you out with information about how different types of trusts can impact you.
The Joint Account Holder
A joint account is created between two or more individuals. This is most commonly used by business partners or spouses. But it can be shared by any group of individuals who trust one another. Either of the individuals who are named in the account can have access to the money.
If the debt of the deceased person is linked to such an account, then the joint account holder will become responsible for their share as well.
The Co-Signer of The Loan
Another situation that poses an exception from the general rule is if there is a co-signer of the loan. Having someone co-sign a loan helps your chances to apply for a loan, as that person promises to take on the responsibility of the debt if the borrower can’t pay it back, for whatever reason, even death.
Specifics of State Law
In some states, there are specific laws in place that will pass on any unpaid debt to the deceased person’s spouse. So, if you are contacted by someone in this regard, make sure to get in touch with a lawyer. They will be able to give solid advice based on the particularities of your situation.
Community Property States
There are a couple of states in the US that have implemented community property laws. These laws imply that all assets obtained by a couple during their marriage are split equally. In such states, the living spouse might be required to take on the deceased person’s debt through community property.
You can find a complete list with the community property states by accessing this link.
Contact a Lawyer
Although the responsibility for the unpaid debt of a deceased person generally falls into the hands of their estates, there are some exceptions. If you want to be clear on who will take on your debts after death, it is best to look over your case with a lawyer. They will analyze the specifics of your situation and give you a clear answer.
