What Happens if You Die With Debt? What You and Your Family Should Know
Does debt die with you? No, but family usually isn’t responsible for paying, either. Unpaid debt typically comes out of the deceased’s estate. If there isn’t enough money in the estate, then some debts will go unpaid.
But there are different rules for cosigners and in some cases, surviving spouses and adult kids.
Learn what happens if you die with unpaid debt. This information can help you get your affairs in order but it’s also important for families. After a loved one dies, bills continue to roll in. It can be confusing what you are and aren’t legally obligated to pay.
- Your debt will be paid off with your estate, or the assets you leave behind.
- Cosigners and co-borrowers are legally obligated to continue making payments on loans and cards.
- Surviving spouses usually aren’t responsible if the debt is not in their name — except in community property states.
- In some states, adult children and spouses may have to cover medical and nursing home debt.
Who pays off debt after someone dies?
Generally, the deceased person’s estate is responsible for their debt when they die.
An estate is the collection of assets and debts someone leaves behind. Think of it as their net worth at death. It’s the executor of the estate’s job to sell these assets to pay off debt and distribute remaining assets to heirs. This process is called probate.
If there’s any debt left over once the estate is liquidated, then that debt remains unpaid. The same is true if the person didn’t have an estate.
When can debt be inherited?
Although debt isn’t usually inherited, there are a few scenarios where you could be held personally responsible for someone else’s bills after they die.
| Situation | Typically responsible for debt? |
|---|---|
| Surviving spouse (not in a community property state) | No, unless they cosigned the debt or it is a joint account. |
| Surviving spouse (in a community property state) | Yes, in most cases, as community property laws often require spouses to share debts incurred during the marriage. |
| Adult children (not in a filial law state) | No, unless they cosigned the debt or are legally tied to the account. |
| Adult children (in a filial law state) | It depends. Filial laws vary by state, but in some, adult children may be held responsible for unpaid debts related to parental care, particularly medical expenses. |
| Authorized user on a credit card | No. |
| Cosigner | Yes. |
| Joint accountholder or co-borrower | Yes. |
Surviving spouse
Assuming that you didn’t get the loan together, you’re usually not responsible for your spouse’s debt after they die. That is, unless you live in a community property state. In that case, you are responsible for any debt your spouse incurred while you were married.
- Alaska (if you opt in)
- Arizona
- California
- Idaho
- Louisiana
- Nevada
- New Mexico
- Texas
- Washington
- Wisconsin
Florida, Kentucky, South Dakota and Tennessee are not community property states, but you can earmark property that is held in a trust as communally owned, if you wish.
Medical debt and nursing home bills are different. Many (if not most) states follow the Doctrine of Necessaries. This can require surviving spouses to pay debt resulting from their spouse’s care and comfort (including medical and nursing home debt).
If a medical facility or nursing home requests payment, talk to an estate lawyer. Ignoring it could get you sued by debt collectors, and most lawyers give free consultations.
Adult children
Adult children are also usually not required to pay their parent’s debt after they die. But like with surviving spouses, it depends on where you live and what kind of debt your parent owed.
Currently, 29 states have filial responsibility laws. In these states, adult children can be held financially responsible for their parent’s medical and nursing home bills.
These situations have a lot of nuance and depend on factors like how much your parent earned, whether you have the financial means to pay the debt and more. Check with an attorney for more information.
Currently, there are 29 filial law states.
| Alaska | Georgia | Louisiana | New Hampshire | Oregon | Utah |
| Arkansas | Idaho | Massachusetts | New Jersey | Pennsylvania | Vermont |
| California | Indiana | Mississippi | North Carolina | Rhode Island | Virginia |
| Connecticut | Iowa | Montana | North Dakota | South Dakota | West Virginia |
| Delaware | Kentucky | Nevada | Ohio | Tennessee |
Authorized users
If you’re just an authorized user on a credit card, you’re typically off the hook. Being an authorized user means that you were allowed to use the card, but you weren’t responsible for making payments.
Cosigners and co-borrowers
If you cosigned or co-borrowed, then you are legally responsible for debt if the primary accountholder dies. It doesn’t matter your relationship to them, that debt is as much as yours as it was theirs. This goes for loans and credit card debt.
Can you keep a home or car after a loved one dies?
There are two main types of debt: secured and unsecured. Unsecured debt doesn’t require collateral, and secured does. A mortgage is secured because it uses the house as collateral. Credit cards and almost always unsecured.
As a reminder, proceeds from your estate will go toward your unsecured debt. Any debt left over will remain unpaid. Secured debt is sometimes treated differently than unsecured debt after someone dies.
Mortgages
If you have a co-borrower on your mortgage, they will assume responsibility for the loan. If not, you can pass your house and the loan on to your beneficiaries if you still owe a mortgage when you die.
From there, the beneficiary can keep it and continue paying the mortgage, or sell it and use what they pull in to pay off the loan.
If you inherit a home and don’t plan on keeping it, list it ASAP. The longer you own the home, the more likely it is that you’ll pay capital gains tax — especially in hot real estate markets with rising home values.
Car loans
As with your home, your car and car loan will go to your co-borrower or cosigner, if you have one. Beneficiaries can also take over your car loan payment and keep the car.
Ask your lender if your contract has a death clause. This explains what the lender will do to recover what you owe if you die.
Regardless, if the loan stops getting paid, the lender will repossess your car and the lender will try to get what it’s owed through your estate.
What debt collectors can (and can’t do)
The Fair Debt Collection Practices Act (FDCPA) protects you and your loved ones from shady debt collectors, before and after your death. Although the FDCPA is vast, and below you’ll find just a few of the protections it offers.
Debt collectors can:
- Call surviving spouses about their loved one’s debt
- Contact other people to get the executor of estate’s contact information
Debt collectors can’t:
- Tell you that you’re responsible for a debt they know you aren’t
- Call you after 8 p.m. or before 9 a.m.
- Harass or threaten you
- Contact your job if you’ve told them to stop
Is a debt collection company harassing you or violating your rights? Report it to the Federal Trade Commission (FTC).
5 ways to protect your family from debt after you die
A will won’t shield your family from debt, but getting one should be your first step.
If you die without a will, expect a lengthy probate. The courts will have to figure out how to divide your estate, based on next of kin. This can be stressful, especially when your loved ones are already grieving.
Once you have a will, the following steps can help protect your family from debt and get the most out of your estate.
1. Set up a living trust
A living trust is a legal document that helps ensure that your loved ones get what’s in your estate, not your creditors.
When you put an asset in a living trust, you no longer own it — the trust does. Since you no longer own the asset, your creditors can’t come after it to cover your debt. Instead, the asset will skip probate and go to whoever you list as beneficiary.
2. Avoid cosigners and co-borrowers
Cosigners and co-borrowers must pay your debt after you die. You both share equal responsibility to the loan or credit card. Avoiding cosigners and co-borrowers eliminates this risk.
If you already have a cosigner or co-borrower and you know your time is short, consider refinancing.
When you refinance a personal loan or auto loan, you will have the option of removing your cosigner. But if your credit score is shaky, you might have a hard time qualifying by yourself.
3. Consider credit life insurance
Life insurance is complicated, so you should speak to an agent. In the meantime, research credit life insurance. This type of policy is specifically designed to cover your debt after you die.
Credit life insurance can help protect your cosigners, surviving spouse and kids (if you live in a community property or filial law state). It also means more of your assets will go to your beneficiaries rather than be sold to pay what you owe.
4. When you have the option, always designate a beneficiary
Some assets allow you to choose a beneficiary. Retirement accounts like 401(k)s and IRAs, for example. By selecting a beneficiary, you’re making sure that the asset ends up in the hands of your loved one instead of debt collectors.
5. Ask your bank for a transfer on death form
Some banks let you select a beneficiary for your bank account, but it typically requires an extra form called transfer on death (TOD) or paid on death (POD). When you die, that account will skip probate and your beneficiary will become the owner. This stops debt collectors from staking claim to it.
One of the biggest gifts my mom gave me was getting her affairs in order before she died.
She gave me legal and medical power of attorney. She had a will and listed me as executor. She prepaid for her cremation. And most importantly, she got help from a lawyer to set things up so that I could avoid probate.
These things aren’t fun to talk about, but they’re necessary. Losing a loved one is hard enough. I couldn’t imagine having to navigate a bunch of red tape in the process.
— Carol Pope, senior staff writer
Frequently asked questions
Your family probably won’t inherit your debt, but it’s possible. Generally, your estate (or, the assets you leave behind) will be used to pay what you owe. If the money runs out, outstanding debt won’t get paid.
But if your family took out a loan or card with you, they will have to continue paying as they will now be the sole accountholder.
Surviving spouses are responsible for debt you incurred while you were married, but only in community property states. In some cases, they could be responsible for your medical debt, even in non-community property states.
Adult children can also be held liable for your medical and nursing home debt in filial law states. All that is to say, estate law is complicated and you should speak to a lawyer for personalized advice.
A spouse is usually only responsible for your debt if:
- They cosigned a loan or credit card with you.
- You live in a community property state, where debt from marriage is shared.
Medical debt is different. Your spouse might still have to pay medical or nursing home bills, even if you don’t live in a community property state.
Estate laws vary and can be complex, so it’s best to speak with a lawyer to get advice based on your situation.
If you took out the mortgage with someone else, the mortgage is transferred to them. If you willed the house to someone, then that person must keep making mortgage payments if they want to retain ownership.
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