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Where Do My Debts Go When I Die?

Just as death and taxes are inevitable, so too are debts. When persons die they invariably leave some unpaid bills.  What happens specifically, however, to debts when a person dies? Who is responsible? Spouses, children, parents? Heirs? Here are some general guidelines about financial obligations to keep in mind if you are dealing with the death of a loved one:

As a general rule, when someone dies, their estate owes the debts, no one else.  If the deceased had a will or trust, then it is the executor’s task to ascertain the deceased’s unpaid debts and pay them out of the estate. Usually, the first priorities for an estate administrator are funeral expenses, taxes and unpaid debts. After that, beneficiaries can be paid assuming there are still sufficient funds in the estate. Adult children are not usually personally responsible for the debts and obligations of their parents.


Unpaid debts can be secured, such as a mortgage on a house, or unsecured, such as credit cards. Sometimes the deceased’s home or other personal property have to be sold in order to satisfy debts. If there is not enough money to cover all of the deceased’s debts, the creditors (such as credit card institutions) usually have to write that debt off. As unsecured, credit card companies are typically a lower priority with estate administrators who want to satisfy the secured debts first.
If a deceased had no will or trust, his or her estate would be subject to p
robate but the same rules still apply. The administrator of the estate, via court oversight, would pay off debts from the estate. One reason why probate takes so long is that the court allocates several months at the outset of a probate for creditors to come forward.

What if the deceased had a 401K, pension plan, a brokerage account or an insurance policy? As a general rule, these kinds of instruments have named beneficiaries or contingent beneficiaries. As such, those named beneficiaries would receive benefits. These instruments do not pass through probate and are thus not part of the estate and are exempt from being used to pay a deceased’s debts. If the estate, however, was a beneficiary of one of these instruments, then proceeds would go into the estate trust fund and become part of the deceased’s estate and those funds would be used to pay obligations.

What about the family home if the deceased had a surviving spouse and the mortgage is not fully paid off? As a general rule, when a spouse dies the surviving spouse would own the home outright if the property is in joint tenancy or held as community property. If a house has a remaining mortgage the surviving spouse can take over the payments. According to law, a surviving spouse is not required to immediately pay off a mortgage. If assuming the note is not feasible, however, the surviving spouse can always sell the property.

California is a community property state so some other guidelines come into play as to a deceased’s indebtedness. Since community property laws dictate that a couple share their property equally, so too they must share their debts equally. If there is community debt, a surviving spouse will be responsible. That usually applies to credit cards either spouse or one spouse acquired during marriage. If a deceased, however, had a debt in his or her name only and it was considered legally ‘separate,’ or had debts from before the marriage, the survivor is usually not responsible unless that spouse acted as a co-signer.

If the adult child of a deceased co-signed a loan prior to the deceased’s death, then that child will be responsible for the remaining debt. This usually happens when the adult child’s credit is better than the elder and a loan is applied for. If the adult child is just an  ‘authorized’ user on an elder’s credit card, that adult child will not be liable when the elder dies.
For California residents where estate administration, community property principles and debt law can all intersect, it is usually wise to consult an experienced estate planning attorney if there are issues concerning unpaid obligations of a deceased.  This is especially true if creditors and collection agencies start calling about a deceased’s unpaid bills. Debts and possible future obligations should also be a topic of conversation with an experienced estate planning attorney when authoring one’s estate plan to begin with.

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