When a loved one dies, who bears the responsibility for his or her debts?

Based on figures obtained from several reputable banking and financial sources, the average credit card holder has nearly $8,000 in revolving debt, while those individuals who have student loans carry an average balance on those loans of roughly $25,700. When it comes to outstanding motor vehicle loan and home mortgage debt, the totals average roughly $10,400 and $100,200 respectively. This means that an individual who has debts associated with credit card(s), student loan(s), motor vehicle(s) and a mortgage is likely to owe around $144,300.

Depending on one’s age and financial means, these figures may be adjusted up or down. For many people, debt and paying off debt is a consistent and revolving concern throughout one’s lifetime. For example, while older adults are more likely to have fewer debts related to mortgages, motor vehicles and student loans; they are more likely to acquire debts related to long-term care and medical needs.

Given the significant amounts of debt that most U.S. adults carry, it’s important to examine what happens to these debts when an individual dies. Answers to questions about outstanding debts are likely of special interest and concern to surviving heirs who may worry that an estate’s assets and their inheritance will be swallowed up by creditors.
When a spouse or parent passes away; family members are left to deal with their grief and sort out a loved one’s estate. In cases where a loved one had outstanding debts, creditors may seek out a surviving spouse or relative. It’s important to note, however, that, in many cases, a spouse or relative is not obligated to pay these debts.

In fact, a spouse or relative is only obligated to pay debts to which they are personally linked. For example a spouse or relative that is named on a home mortgage or who co-signed a loan would be personally responsible for those debts. In order to recover other outstanding debts, creditors must follow the proper legal procedures, which do not include or sanction harassing surviving spouses or heirs, and go through the estate.

Source: FindLaw.com, “Debts After Death,” Nov. 4, 2015

The Motley Fool, “The Average American Has This Much Debt — How Do You Compare?,” Jan. 18, 2015

Additional resources provided by the author

For more information, please contact estate planning attorney Regina Kiperman:
Phone: 917-261-4514
Email: rkiperman@rklawny.com
Or visit her at her new location:
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Suite 304
New York, NY 10038

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