What Happens if Someone Passes Away who has Debt?

Whether you’re concerned for an aging family member who has debt, or are planning for your own future, understanding what happens to debt after a person passes away is helpful. Let’s find out more about what happens if someone passes away who has debt.

What Happens if Someone Passes Away who has Debt?

Common Debts

Credit card and mortgage debt are the most common kinds of debt acquired by people during their lifetime.

These types of debt are specific to the account holder, and the account holder only. Once a person has passed away, their credit card debt does not transfer to living family members since they are no longer able to make payments.

The only case in which someone living would become responsible for paying off the credit card or mortgage debt of the deceased is if they were a cosigner on the account or a joint owner of the loan.

Be Cautious

Unfortunately, these rules don’t stop creditors from contacting family members to ask for payment on behalf of the deceased. Some will try to guilt you into paying, while others will deceitfully tell you that you are required to make payments even when you aren’t legally obligated to.

Consulting with a professional Maryland estate planner or lawyer is a good way to better understand what debts you are personally responsible for, if any, after a family member passes away.

Does debt just disappear?

While you and other family members will not be responsible for the debts of the deceased, these financial obligations do not simply go away. Most of the time, they transfer to the estate. However, careful planning can mitigate these debts.

If planning is done properly, the estate should have enough assets within itself to settle any debts the deceased may have at the time of their death. If not, it’s important to probate the estate properly and wait until the estate is legally eligible to be closed before distributing any assets to family members. Otherwise, the Personal Representative (Executor) can be held personally responsible for certain debts.

Tip: Your will should include information about who will be the Personal Representative of the estate. This is the person who will be responsible for notifying creditors and credit reporting agencies of the passing of you or your family member.

Still have questions about debt after death? DK Rus Law is here for you. We have over 30 years of experience with Maryland estate planning law and are dedicated to helping you make smart legal decisions and navigate the legal process confidently. Contact us today to request a free consultation.