The Problem of Debt After Death
Because it can be very difficult to settle the affairs of a loved one who has passed away, quite often some of the surviving family members will have to make a number of important financial decisions on behalf of the recently deceased. Unfortunately, this occurs at a time when they are already very emotional and possibly stressed out.
One of the biggest decisions left to surviving family members has to do with whether or not they should repay debts incurred by the decedent, including such potentially large debts as mortgage loans, student loans or credit cards. Quite often, a creditor may try to make family members think they are responsible when they are actually not. The estate is responsible for meeting any debt obligations incurred by the decedent, whether or not there is a will. The the decedent's spouse may be responsible for debts in some cases, but other family members are usually not responsible for these debts.
When someone dies, the debts they incurred usually die along with them. Relatives are not responsible for paying off a decedent's debts at the time of his or her death. For example, credit card debt belongs only to the account holder or holders. Unless you were a joint account holder or you were a co-signor on the account, you have no responsibility to pay back any of this debt.
It is just a fact that, if there isn't enough money in the estate to pay all of the bills, many creditors will just not be able to collect their money. Sometimes, however, debtors will go out of their way to collect their money, to the point of demanding money from family members and inferring that they are responsible for paying the debt. They often do not understand that payment of any debt incurred by the decedent is voluntary, and is not an obligation.
Family members and executors are entitled to request copies of the debts owed by the decedent. According to the CARD Act, the issuer of a credit card has 30 days to provide balances to those handling an estate, and they cannot charge interest, fees or penalties if the balance is paid off within 30 days after they provide the information. And unless you are on the account, a creditor is not allowed to go any further with collection efforts.
Like credit card debt, mortgage debt belongs to the borrower. If a spouse is a joint owner on the loan, then the surviving spouse becomes liable for the loan debt after the debtor spouse's death. However, no family member who is not specifically named on the loan paperwork is responsible for the debt. That does not mean the mortgage debt is forgiven, of course. The surviving spouse can continue to choose to pay on the note and to live in the home, or they can sell the house and use that money to pay off the loan.
Another thing all surviving family members should understand is, insurance money is not considered part of the estate, and no family member who is named as a beneficiary on a life insurance policy is obligated to use that money to pay the debts of the decedent.
