Often, people die with a variety of financial obligations that need to be sorted out and addressed to settle their affairs. The executor of the estate normally pays any outstanding bills with a deceased person’s available assets.
Regardless of whether you have been named as an executor of someone’s estate or are just wondering what your responsibilities are when a family member dies, the prospect of potentially being on the hook for debts is likely to make you uneasy. Here are some questions and answers about various scenarios regarding outstanding credit obligations after death.
Can I inherit someone else’s debt after their death?
It depends. You probably are liable for the charges if you had a joint account with the deceased or if he or she ran up a balance on a card that you originally applied for. Likewise, if you co-signed any loan papers for the deceased, you are likely responsible for any remaining loan balance if there are not enough funds in the estate to pay it off.
If it takes awhile to settle the estate, will the credit companies keep charging interest on the balance owed?
No. The Credit CARD Act of 2009 prohibits credit card companies from tacking on fees or interest after the date of the balance holder’s death while the estate is being settled. Credit companies must promptly communicate with the executor of the estate regarding the final balance on the credit line.
Are all assets eligible to pay outstanding debts?
No, the following assets are not considered as usable to pay off the deceased’s debts:
- IRAs that pass to a surviving spouse
- Most brokerage accounts
These assets go directly to the listed beneficiaries.
Be aware that creditors can get aggressive and may even outright lie that family members are now liable for their deceased loved one’s debt. Clearing up the matter may necessitate legal consultation.