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Death and taxes as the saying goes are the only two things we can count on.
But what about any debts or bills you owe when you die?
It is a question many have, and many would like to not thing about.
As grim as it sounds, it is true, we all must die, as to if we die owing money, that may be a different storey.
However, for this little gem of information, we are going to assume a few things:
- You die owing money
- You have an estate
- You don’t have an estate
The difference between having an estate and not having an estate is you may have owned property, or had some other assets of value when you went from this world to the next.
This not meant to be the definitive piece of death and debt, there are also other factors to consider, such as if you have a Will, and also if you have any life insurance. These can play roles in your debt and death circumstance.
Again, of the two situations we have outlined, death is the constant, but as to if you have assets or leave behind an estate are the variables.
I Have an Estate
If you have an estate and leave behind property or other assets that the Representative, Executor, or Administrator of your estate must handle and dispose of, then your creditors, those you owe money to, be it a bank, credit card, whomever, can make a claim on that estate.
The estate then has the liability of your debts.
I Do Not Have an Estate
If you die owing money and do not have any assets or an estate your debts in essence die with you.
It really is as simple as that.
However, there can be some questions that arise, such as:
Are my family responsible for my debts when I die?
No. The only way a family member, be it a partner, spouse or other family member is responsible for your debts is if they are a co-signer, guarantor, or are on the debt with you.
What about my life insurance?
Life insurance passes out of Probate, and is to be given to the designated beneficiaries.
Life insurance is not part of an estate, so it does not need to be used to pay debts. In rare instances, and I mean rare, a creditor may try to seek legal action to access an insurance policy. Not only is this extremely rare, and I have only heard about it in films, but there would need to be fraud or the deceased trying to hide assets and make themselves judgment proof.
Estate planning and financial planning can be complex and complicated. They can also be deemed a legal process, and as such you need to seek professional and possibly legal advice.
Live long and prosper!