According to a U.S. News and World Report story out this week, most probably your unpaid bills will be subtracted from any inheritance you leave to your loved ones.
In 2013, more than 61% of senior households had an average of $40,900 in debt. And it’s likely that many will die with those debts unpaid.
If you don’t have any assets, your debts may die with you. However, if you have assets, your creditors may be able to collect what they’re owed from those assets and the amounts subtracted from what your heirs will inherit.
How debt is handled depends largely on the state in which you are living at the time of your death. Nine states are “community property” states. That means your spouse is responsible for any debt incurred during the marriage. In other states, a spouse is not responsible for bills that are solely in the other spouse’s name. And some types of assets, such as retirement accounts and life insurance payouts, usually can’t be claimed by creditors.
The story goes on to list six things to do if someone you love has debt when they die:
1) Consult a probate attorney.
2) Notify creditors of the death. Once this is done, those accounts are frozen.
3) Catalog your loved one’s assets.
4) Determine what your loved one owes. That will help determine what, if anything, needs to be sold to pay the debt.
5) Have beneficiaries file for assets that pass without probate.
6) File tax returns. Even after death, tax returns need to be filed on time.
For more information about estate planning and helpful hints on what to do when settling a loved one’s estates, check out our website www.diesmart.com.