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How are debts handled after death?

Thinking of handling an estate might bring up thoughts of dividing assets. What some people might not realize is that there are some debts that have to be paid after a loved one passes away. Learning a little bit about how debts are handled can help you if you have to deal with debts after a loved one dies. One thing you should realize is that not all debts are handled in the same manner when the debtor passes away.

Do I have to pay for my loved one's debts?

Generally, you aren't responsible for paying your loved one's debts after he or she dies. The debts are the responsibility of the estate, which is handled by the estate administrator. If you are a surviving spouse, you can opt to continue to make payments on the mortgage if you plan to stay in the home because the mortgage debt isn't erased when the debtor passes away.

What about credit card debt?

Unless you are a co-signer or joint account holder with the person who passed away, you likely aren't liable for the debts because the debts die with the person. A credit card company may try to collect the balance owed from the person's estate. Of course, in the case of a married couple, the surviving spouse might be responsible for the credit card balances.

Can creditors claim the life insurance policy?

Life insurance policies aren't part of an estate. When a person dies, the life insurance payment is the property of the beneficiary. The beneficiary doesn't have to pay the debts of the deceased with the proceeds from the life insurance policy.

Source: FindLaw, "Debts After Death," accessed April. 16, 2015

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