We have discussed the importance of having a will and the many ways that it protects your loved ones after your death. But what happens to your debt should you die intestate – or without a will?
A lot depends on the type of debt you have, where you live, the size of your estate and whether or not there were any co-signers on your debt.
Generally, your children and other heirs will not be held responsible for paying creditors what you owe, unless they inherit assets that may be tied to your debt. If that is the case, there are assets that may be sold to settle a debt. An attorney will know exactly how to figure out what fits into this category.
If you have a mortgage, your heirs will be responsible for paying the payments. They may choose to keep the property and seek a loan modification in order to make payments. Or, they may decide to sell the property. The mortgage company will get first dibs on any proceeds from the sell.
You should also know that if you inherit a property when a loved one dies, you also inherit the tax liability. This is another area in which a legal will can make things much easier and more comfortable for those left behind.
Does marriage change things? In a way, yes it does. A spouse is responsible for your outstanding debt if he or she co-signed on the loan or credit card. In states that have common law property, a spouse may not be liable for debt that is solely in your name. If your state follows community property rules, your debt is your spouse’s debt if it was acquired during the marriage.
As you can see, there are many things to consider after a loved one dies, and you’ll want an attorney to help you through the legal channels. Please consult our Online Legal Directory to find an attorney in your area.