Your debt doesn’t expire when you do. If you pass away with outstanding bills, your debtors can recover payment from your estate. Your estate includes your physical and monetary assets, such as your house and funds in your bank account. However, it does not include proceeds from your life insurance policy.

Relatives and Decedent Debt
Typically, creditors cannot come after your relatives for debt remaining after you die. But, any inheritance you hope to leave them will be lessened by the amounts you owe. When probating the estate, bills and debtors are paid out of the estate first. However, if your estate doesn’t yield the sufficient funds to settle your individual outstanding bills, your debtors are out of luck.

In come circumstances, your spouse or other relatives may still be responsible for debt that outlives you. This is the case in community property states, where you and your spouse are both responsible for the debt you have accrued together. Co-signers on loans and credit accounts will maintain responsibility for any remaining loan amounts, as well.

If you and your spouse or partner own a home with an outstanding mortgage, your mortgage co-signer is still responsible for payments after your demise. Options include remaining in the home and paying off the mortgage over time, selling the house and paying off the balance, or paying off the loan amount with life insurance proceeds. If you have no spouse, your children or other beneficiaries have similar options — but the loan must be satisfied or the house relinquished.

If you have questions about your estate, debts and assets, speak with Susan Grissom, an experienced estate planning attorney to get answers and tailor an estate plan that addresses your concerns.

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