By Allen Francis
I really need to stop debating my friends. You know the type of people who, no matter the subject you are discussing, make up their facts as they go along? Or, change their argumentative stances whenever they realize they are wrong? Arguing with people who use facts as tools of self-serving convenience is a useless endeavor. It just turns me off when grown adults won’t enlighten themselves and dull the intelligence of others. Take the issue of debt after death, for instance.
Debt After Death
The debate centered around the idea that if you die, then your debt automatically is forgiven or voided. My friend is in a lot of debt and seemed to be projecting this idea more out of wishful thinking than from sources of fact. The point is that depending on your personal circ*mstances, the debt that you amass in life can still be owed after death.
I have researched this subject for my own purposes. Your estate is everything that you own at the time of your death. The probate process involves the liquidation of your estate to pay bills and distribute anything else to heirs. Your city’s court system or a legal executor or caretaker of your estate will make the decisions when you die. Or, you can hire a probate lawyer.
Probate Lawyers
Probate lawyers are not cheap. You can pay them in flat fees, amounting to thousands or hundreds of thousands of dollars. Or, pay $250 to $1,500 an hour for their services. In some states, probate lawyers can be paid in a percentage commensurate to thevalue of the estate. Like 4% of $100,000 or 1% of $10 million, and so on.
Of course, if you are dead, you won’t be responsible for paying these expenses. Your spouse, children, loved ones, and anyone who may have co-owned, shared, or were legally responsible for your debts will be responsible. Worse, your estate could be entirely liquidated to pay off debts leaving nothing behind for your heirs.
Debts that Survive Your Death
The kind of debt you owe and the state that you live in determines the debts that will survive after your death. If you are a co-signer for any kind of debt, like college tuition, auto loans, or mortgages, for example, then you’ll owe any remaining amounts even after you die. Mortgages, medical bills, and any joint financial accounts are also fair game for seizure as well.
Do you live in a so-called, “community property” state? Then any debt you leave when you die the responsibility of the surviving spouse. Student loans, property directly inherited to beneficiaries, life insurance, and retirement insurance are harder for creditors to collect after death.
Creditors can harass your family for long periods of time after your death. Even though it might be difficult for them to collect on your posthumous debts, they will try.
Keep Finances Straight In Life
Always keep situational awareness of your finances. Make sure you update the beneficiary list for all of your insurance policies. If there are no beneficiaries on a policy, the value may be lost in probate. Further, it’s important to make sure you continuously update your will. Let your family know that there isn’t much creditors can do for certain debts except make harassing phone calls.
Consult a financial advisor or lawyer. Creditors will try to coerce your surviving relatives to pay for bills they may not responsible for. If they do, they could legally become responsible for them afterward. Don’t assume that the responsibility for paying your debts ends after death. Know for sure. It’s the best way to keep your surviving relatives from spending a fortune on probate lawyers to save your estate.
Read More
- 6 Solutions for Getting Out of Debt
- Overcoming a Financial Dilemma
- When Is Debt Consolidation A Realistic Option?
Allen Francis
Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.
