Debt and Death - Issues You Need to Know

Debts and the Deceased

     What about any debts you have when you die? Whose responsibility is it for any bills to be paid when the person owing them is no longer with us? Does one get off without any strings attached? What about their relatives, do they have to make up for the debts owed? Does the Government just dissolve any debt and take them on themselves? These are issues one should look into to better understand the consequences that come with death and debt.
     Any debts that were accumulated by the deceased will have their assets used to pay them off. This includes funeral costs and any legal fees regarding the persons Will. Once these particular financial obligations are met, then usually the remaining items go to whoever the person willed them to. For example, perhaps your mom owned a house worth $400,000 but still had some payments left on it for $100,000. Upon death, you realized that the house was willed to you. It would be your responsibility to pay the $100,000 still owing, probably in the way of a mortgage. This could be done with other monies you have or via selling the house and using it to pay what is owed.

     Now lets assume one of your remaining parents purchased a house for $400,000 and due to other circumstance, the house is now worth only $300,000 and they had only paid $60,000 of it, and his estate has no other assets of value, then you could only sell the house for $300,000 yet still owe the bank $340,000? No, in this case the bank cuts its losses; you would not be responsible to pay for any amount above what was willed to you. However if you or another family member are a co-signer of any loans outstanding to the deceased, they will still be the remaining persons responsibility.
     Also keep in mind; it is good not to have great debts when older since items like precious family heirlooms may have to be auctioned off to pay the creditors. If debts are owed and the estate owns a five hundred year old artifact, it most likely will be sold, and the family looses out on these items.