Allocation of Debts Among Beneficiaries

Family members may not be responsible for the debt of the deceased.

When an individual dies, one of the main questions his family member may have is who is responsible for his outstanding debts. Fortunately, debts may only be allocated to the individual's beneficiaries in certain circumstances.

Facts

Unlike assets, debts are not typically inherited by family members when an individual dies. If the deceased individual is the only person legally responsible for paying the debts, they may not get paid at all.

Features

In order for a creditor to receive payment for a debt owed by the deceased, it must file a claim against the deceased individual's estate.

Significance

If the deceased individual lived in a community property state, such as California, her spouse may be held legally responsible for paying her debts--even if they are not in his name.

Considerations

Any debts that were accrued under a joint account that the deceased held with another individual are automatically transferred to the surviving account holder. Whether or not the surviving account holder accrued the debts is irrelevant.

Warning

Collection agencies will often attempt to collect a deceased individual's debts from family members who are not legally obligated to pay.

References

• DebtFreeDestiny: Debt After Death - Who is Responsible?
• The New York Times: You're Dead? That Won't Stop the Debt Collector

Resources

• CardRatings.com: Responsiblity of Debt Incurred Prior to the Death of a Parent
• EstatePlanningLawFirms.com: Debt After Death in an Estate
• CNN.com: Rogue Debt Collectors and How to Fight Them