Are beneficiaries responsible for debts left by the deceased?
Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina.
He has also earned an MFA in screenwriting from Chapman Univer…
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Jeffrey Johnson
Insurance Lawyer
Benjamin Carr was a licensed insurance agent in Georgia and has two years’ experience in life, health, property and casualty coverage. He has worked with State Farm and other risk management firms. He is also a strategic writer and editor with a background in branding, marketing, and quality assurance. He has been in military newsrooms — literally on the frontline of journalism.
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Benji Carr
Former Licensed Life Insurance Agent
UPDATED: Dec 7, 2021
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The Facts of Life
The deceased individual’s estate will be responsible for the debt
Most family members won’t have to pay for leftover debt
Some exclusions apply, such as with spouses in certain states
Are beneficiaries responsible for debts left by the deceased? It may depend on whether or not you signed any agreements before that person’s death.
If not, you won’t have to pay for any deceased individual’s debt out of pocket. Advanced planning with life insurance can help ensure you leave something behind for your loved ones.
If you’re researching debts after death with no estate, enter your ZIP code into our free quote tool to get an idea of what you could pay to leave them some financial support.
Are beneficiaries responsible for debts left by the deceased?
According to the Federal Trade Commission, the deceased individual’s estate will first be responsible for any debt. After that, it will likely fall to the next of kin to pay all the debts from that person’s estate. As a result, the beneficiary often won’t have to draw from their finances to pay any debts.
There are a few exclusions to this rule, including:
Co-signed an agreement they were paying on
Spouses in certain states
Legally responsible for resolving an estate that’s violated probate laws
In these cases, you may be found responsible for paying the debts out of your pocket. On the other hand, if none of these circumstances apply to you, the debt will likely go unpaid if the estate cannot pay the total amount.
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What happens to your debt when you die?
What happens to debt when you die? If you die owing to a debt, the person you have named as your executor will be responsible for paying it from your estate.
That person will pay using the money remaining in your estate. Most relatives won’t be responsible for paying that person’s debt when they die.
What happens if you die with debt?
If you don’t have the money in your estate to pay for your debt, you’ll have that much less to leave to your loved ones. Any money you had to your name will likely go to paying for any debts still sitting on your account.
Can you inherit debt from a deceased relative?
Most of the time, relatives won’t be responsible for paying out of pocket for the deceased relative’s debt. This isn’t always the case, though, and in some cases, the debt can transfer. The situations in which one might inherit debt include:
Co-signed on a loan
Joint account holder on credit card
State laws for spouses
State law regarding jointly owned property
If you inherit the dead person’s debt, you’ll likely receive some notice before you’re expected to start paying. In most of these cases, you’d have had to sign a document in which you already know you bear some of the responsibility.
What debts are forgiven at death?
Most debts aren’t forgiven as much as they go unpaid. With the money left in your estate, your financial administrator will pay out whatever debts they can.
If there are any finances leftover, those can be passed down as inheritance or for whatever other reason the executor wants.
Who has to pay for a deceased person’s debts?
In short, the deceased person is the only one responsible for their debts. When someone dies, they are still accountable for their debts. However, because they can no longer pay on those debts, the executor will use the remaining value of their estate to pay off those bills.
If you’re a spouse, the lenders may hold you partially responsible for some debts depending on the state you live in.
While your loved ones won’t be held financially responsible for your debts, you likely won’t be able to leave anything behind if all your money goes to your old bills. Getting a policy with the best life insurance companies can help ensure you leave an inheritance behind for your loved ones.
Beneficiaries and Unpaid Debts: The Bottom Line
If you’ve recently lost someone close, you may be worried about inheriting their debts. However, unless you’re legally responsible via a previous agreement, you likely won’t have to take on that person’s debts. That being said, you’ll leave less to your loved ones with debt.
Now that you know more about researching debt inheritance, enter your ZIP code into our free quote tool to get an idea of what you could pay to leave your loved ones a financial inheritance.
