What Families Need to Know About Debt After Death

The poverty rate among seniors is rising, giving rise to the question of
whether or not it is possible to inherit debt.

In general, when a loved one passes, his or her debts fall to the estate to
be paid. However, in situations where debt is shared – for example,
jointly owned credit cards or shared student loans – the debt can pass to
the account co-owner, even if he or she was unaware of the debt.

This is why it is important to consider debt planning as part of your
overall estate planning process. Here are some tips on dealing with debt:

Get informed. By law, everyone is entitled to one free credit report
every year from the three major credit reporting agencies: Equifax,
Experian and TransUnion. Spouses should obtain and share their credit
reports with each other so they are informed about any debt issues that
could impact their estates. If debt will potentially impact adult
children, be honest with them about your financial situation as well.

Get advice. Seek the counsel of a Lawyer or financial professional on
your debt issues and how to resolve them. Deal with personal debt before
it can become a potential issue for your family.

Get organized. Ideally, all your estate and financial planning documents
should be in one place where your family informed about where to find
them. Among these documents should be an updated list of current assets
and debts, including financial institution information, account numbers and
passwords.

Get educated. Heirs should educate themselves about what types of debt
will need to be repaid and what may be cancelled or forgiven. Generally,
any unsecured debt held in the deceased person’s name alone – credit
cards, student loans, etc. – will be discharged. While debt collectors
have the right to attempt to collect on the debt – and may contact
survivors to try to “guilt” them into paying – being educated about
liability for debts after death will arm you with the knowledge you need to
respond appropriately.

The best way to learn about protecting yourself and your family is contact
my office and set up a family wealth planning session where we can identify
the best strategies for you to provide for and protect the financial
security of your loved ones.