When a person dies, their debts don’t automatically die with them, but they don’t transfer over to the person’s loved ones unless specific conditions are met. In most cases, the debts become the responsibility of the person’s estate.
If the decedent’s estate doesn’t have the funds to pay for the debts, those debts will have to be forgiven. There is a specific hierarchy for how debts are paid by an estate, so the administrator must take care of them in the proper order. If there’s anything left in the estate, the remainder is distributed to the heirs in accordance with the decedent’s estate plan.
The exception to the estate being solely responsible for the debt is if the account had a co-signer or a joint account holder. In both of those cases, the debt would transfer over to that individual for payment.
What should loved ones do if they’re contacted about the decedent’s debts?
If a loved one is contacted by a creditor who’s trying to collect on a decedent’s debts and that loved one isn’t the co-signer or joint account holder, they should direct the creditor to the estate administrator. The loved one shouldn’t provide any personal or financial information to that creditor.
It’s critical that anyone who’s serving as an estate administrator or who is being contacted by a loved one’s creditors should ensure they understand how these debts are handled. Because these matters are so complex, they may need to work with someone familiar with these matters to ensure they handle things in the correct manner.