We’ve all heard the only two things guaranteed in life; Death and Taxes. Well, maybe we can add Debt to that list; Debt, Death, and Taxes or DDT for short? “DDT – is it really that bad,” you ask. It can be.

Did you know that most folks who pass on to a better place leave debt behind? It’s true. What’s that old adage; “you can’t take it with you!” That makes sense right? You can’t take your assets, and thus, you can’t take your debts either. So what happens to all this debt that’s left here on Earth? Well, that turns out to be a really interesting topic. So, let’s discuss this, shall we?

How Often Do People Die With Substantial Debt?

Nearly 75% of Americans who die today leave debt behind. The average amount owed, not including home loans is nearly $13,000. If we were to include mortgages the debt owed would be about $61,500. Almost 70% of Americans who died in 2018 had credit card debt. Auto loans were owed by 25% of those who died. It turns out that 6% owed money for student loans, a number which is increasing every year according to Experian and credit.com.

Do these statistics surprise you? They shouldn’t. The average person has literally no savings, a car loan, and about $10,000 in credit card debt. Most people don’t even own their smart phone outright rather pay monthly on top of their cellular service bill. If this is you, you are in the majority, and still considered middle class. You shouldn’t be surprised when a loved one passes and you find out they were in the same boat you are in now.

Who Is Responsible for All This Debt When Someone Dies?

Don’t worry heirs are not typically the ones who now owe the debt. The deceased person’s estate is now liable for the debt. However, this could very well affect your inheritance as the creditors get paid first. There are rules for settling an estate, and rules determining how much is owed for the debts against that estate. Much of this depends on the state the deceased claimed as their residence, the total value of the estate, and the types of debts still outstanding.

If a person dies owing more than their assets, an heir can ‘decline to accept’ their inheritance, and thus, they will receive no money, but also not be liable for any of the debt. On the other hand, if someone dies and they have more assets than liabilities, then perhaps some of those assets need to be sold to pay off the debt owed. In this case, the heirs will get the difference (minus any administrative costs to execute the estate and taxes owed).

Needless to say, it makes sense to have a will and plan in place before you die. Of course, this isn’t always how things work out, as no one really knows when or in many cases how they will die.

What If Your Spouse Dies – Do You Owe Their Debts?

Well, in the case of a surviving spouse, it becomes a completely different situation. Again, it does matter where you live, for instance, a ‘community property’ state. In such cases you could be liable for the debt even if it was only in your spouse’s name, and ‘if’ the debt was assumed during the marriage.

Often creditors will lean a little harder on surviving family members to try to get paid. Creditors might also hire a collection agency to try to collect on the debt. It can be a problem when you are already in an emotional state, as they attempt to get you to commit to paying the owed debt, even if you are not responsible.

If you feel pressured to pay a debt that you don’t believe you owe, you need to seek the help of an attorney that knows the law and helps to explain to you your rights. We are here to help.