What Happens to Debt When Someone Dies?

If you’re like most people, you don’t enjoy contemplating your own mortality. In fact, this is such a sensitive subject that a lot of people, including high-net-worth individuals, never create an estate plan. But have you ever wondered about your debt and what would happen to it if you died? If you’re married, would your spouse be on the hook for it? Could your family members inherit your debts as they would inherit your assets?

It’s common for Americans to have around $29,000 in debt and this does not include their mortgage. The question is, do all of your financial problems die when you do? As a matter of fact, it is possible for family members to inherit a decedent’s debts, but it depends on the state the person lives in and whether they have any assets in their estate.

Who is Liable for Your Debts After Your Death?

Generally, when someone dies, only debt that is in the decedent’s name alone (this is key) is paid by the estate. A person’s “estate” includes all of the assets he or she owned at the time of their death, such as their home, their bank accounts, automobiles, RVs, artwork, collectibles, personal possessions, and so on.

The executor or personal representative is the person who ensures all of a decedent’s taxes and debts are paid and the remaining assets are distributed to the beneficiaries. This process is called probate and is overseen by the probate court.

Will your loved ones inherit your debts when you die? It depends if you live in an equitable distribution or community property state. Florida is an equitable distribution state, which means your surviving spouse is not legally responsible for debts in your name alone after you die.

On the other hand, in community property states like California and Nevada, the surviving spouse is legally responsible for any debts incurred by their spouse during the marriage, whether they agreed to take on the debt or not.

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