How is your debt handled when you pass away?

While it may not matter as much to you what happens with your debt once you die, it may matter to those you leave behind.

When an individual dies, his or her debts become part of his or her estate. The executor of your estate is responsible for ensuring that any debts that you amass while alive are paid off using your assets before any inheritance payouts can be made.

Therefore, if an individual has racked up more debts than he or she has assets, it's quite possible that person's heirs won't receive a dime in inheritance.

There are certain exceptions to how debt may be handled though. When it comes to credit cards, it'll matter whether the card was the decedent's alone or whether the account was shared with someone else. If credit card was a joint one, then, in some cases, the debt will transfer completely to the living partner for him or her to repay.

If the card belonged to the decedent alone and it can be shown that there's no money to pay the bill, then the creditor will most likely write the debt off.

In Arizona, a community property state, though, it may be possible for even individual accounts to be transferred to the surviving spouse. The circumstances under which this may occur, as your estate planning attorney will explain to you, vary.

With mortgage debt, generally it's assumed by the individual who inherits the decedent's home. If the decedent had a mortgage on the property at the time of his or her death, then his or her heir would be responsible for continuing to pay it. In doing so, they would pay the same monthly payment, for the same term and at the same interest rates each month until it's paid in full.

Car loans function much the same. So long as the person who inherits it is capable of continuing to pay the note on it, then most likely he or she will be allowed to keep it.

With home equity or private loans, the executor of the estate will be required to pay them back as part of the estate settlement process. Federal student loans are cancelled when someone dies.

If you have questions about how debt is handled when a loved one passes, then you may benefit from discussing your concerns with a Surprise, Arizona, estate planning attorney.

Source: The Week, "What happens to your debts after you die?," Aug. 17, 2017

No Comments

Leave a comment
Comment Information
  • MCBA | Maricopa County Bar Association
  • State Bar of Arizona
  • ABA | American bar Association | Defending Liberty Pursuing Justice
  • Oregon State bar
  • NACBA | National Association of Consumer Bankruptcy Attorneys
  • NACA | National Association of Consumer Advocates
  • Best Attorney Client Satisfaction Badge
Schedule A Consultation Today

Attorneys You Can Depend On And Trust

From our office in Surprise, The Dodds Law Firm, PLC, serves our clients' needs throughout the Valley. To schedule a consultation with a lawyer, call 623-208-6098 or toll free at 877-827-9906. You can also contact us online.

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy