Losing a loved one is an emotionally charged situation, but it’s one that triggers a series of tasks that must be handled. One thing that some people don’t think about when their loved one dies is what’s going to happen to the debts that the individual had. Those debts don’t just disappear because the account holder passed away.
There are three things that can happen with deaths after someone dies:
- Their estate might be liable for paying the debt.
- Another individual may have to pay the debt.
- The debt might have to be written off.
Looking at the debt and the circumstances surrounding it can help to determine which of these will occur.
Who pays the debt?
If the debt had a cosigner or a joint account holder, that individual would be responsible for paying the debt once your loved one died. Because Texas is a community property state, the decedent’s spouse might be liable for paying the debt. If none of those circumstances apply, the creditor may turn to the estate for payment.
If the creditor makes a claim against the estate, the estate administrator will take steps to verify the debt. All claims against the estate must be handled in an order set by the law, which is based on their priority. There is a chance that some debts won’t be paid if there’s no money or assets in the estate plan.
Considering debts is part of proper estate planning because there are sometimes options for protecting assets from creditor claims. Working with someone familiar with these matters may help adults to determine the best option to move forward with a wealth preservation strategy as part of their estate plan.
