A loved one’s debts after death: what you owe and what you don’t

Rather read it? Here’s the whole thing.

The estate pays

When someone dies, their debts are generally paid from their estate: money, property and accounts that pass through probate. If the estate runs out, most remaining debts go unpaid.

When you might personally owe

• You co-signed the loan.
• You were a joint account holder (not just an authorized user).
• You’re a spouse in a community property state, or your state has other spouse rules.
• You agreed in writing to pay.

Being an authorized user on a credit card usually doesn’t make you responsible.

Debt collectors

Collectors may contact the executor or administrator. Federal rules bar them from misleading family into thinking they must pay from their own money. You can ask them to stop contacting you.

Money that usually skips creditors

Life insurance and retirement accounts with named beneficiaries, payable-on-death accounts and jointly owned property with survivorship usually pass directly to the named person.

The executor’s job

• Notify the credit bureaus and close accounts.
• Publish or send notice to creditors as state law requires.
• Pay valid debts from the estate in the legal priority order (often funeral and administration costs and taxes come first).
• Don’t pay from personal funds or pay one creditor early if the estate may be short.

Medicaid

Some states seek repayment of long-term care costs from the estate. Get advice.