If a person dies suddenly, who is responsible for their debts?

Question

I have a life insurance policy that will cover my funeral expences. A small loan I have has life insurance. I was wondering if my life insurance policy would pay off my small credit card debt or would my family, specifically my daughter be responsible for any debts.

Answer 1

Their spouse if they have one, if not nobody.  Anything they have in the bank will be used to cover their debts, that is why their property goes into probate after they die.

Answer 2

I dont think the debt can be pushed onto anybody, but usually theres collateral like signing your car up in case you cant afford to pay your debt..

its either your car or your house the bank takes after you die and you were in debt.

Answer 3

thats a very good question....i always wanted to ask that..

like..what happens to their debts? home with all their stuff and what if that person who passed away doesnt have any family/relatives...and what happens for the funeral....

Answer 4

god!

Answer 5

for most situations no one is. the debt is cleared. Although that's not always the case. Please leave a more detailed explanation of your situation.

Answer 6

If the person who died has assets, then the creditors have first claim before anyone can inherit. If any assets owned have debt which is secured by an asset, then the creditor controls that assets if no one steps in to assume it.

The only practical way to die and have debt that vanishes is to own nothing. And most folks who own nothing don't have debt because they don't have credit.

Answer 7

Their spouse if their spouse is living. It is not even deducted from the estate, last I checked (could be wrong though).

Answer 8

The deceased person's estate is responsible.  If there are not sufficient assets to pay the debts, they are discharged.  Heirs are not responsible unless they are coborrowers or cosigners for the debts.

Answer 9

Defintely your spouse and your estate. If your daughter is the main beneficiary of the will than its really her, as she IS the "estate".

I find it facinating that you have a "lawyer" but haven't purchased life insurance beyond some crappy creditor insurance which is NOT real life insurance. If you pay the loan off its gone. Further, what about income replacement? So your daughter has YOUR debts paid off. So what? Should she drop out of school and start working? How will she save for college?

Its facinating in the sense that a lawyer will charge you in one session what it costs for someone your age to buy $500,000 of life insurance in a year. There is no excuse for penny pinching on something like this. If you aren't here your daughter needs a chance to have a decent chance to succeed in life. Don't take that chance away from her because you wanted to save $15 per month.

Sorry for the harshness but you seemed responsible from your question, and I guess I'm hoping you are sensible enough to take my advice.

Answer 10

Usually the debt is transferred to the beneficiaries who stand to inherit the wealth / estate from the deceased. However, the debt transferred is restricted to the amount inherited.. For Ex: If you leave behind 10,000 to your daughter and you also have an outstanding loan of 6000, your daughter will be obliged to pay the 6,000/- However, on the other hand, if you leave behind 6,000 and the loan amount is 10,000 then your daughter's liability to pay would be restricted to the amount inherited by her ie 6,000/-

Answer 11

Usually the answer is no one, but here is the really important thing to know. Never, ever sign anything put in front of you when a loved one dies without consulting a lawyer. Creditors will try to get surviving members of the family to sign papers that make them responsible for the debt. It is really sh*tty but they will try to get their money any way they can.

Answer 12

Unless you live in a community property state, debt is not inheritable.  Some community property states, your spouse can be held responsible.  

Your estate is responsible for your debts; no one can inherit anything until the debts are all paid.  

Life insurance procedes, well, it depends on who is being paid.  If you pay someone directly, the money goes to them.  If it pays your estate, then the money goes to pay off your debts, then anything left over after the debts are paid, can go to your heirs.

Answer 13

Who ever is appointed to take care of your final affairs is the one who has to take care of any debts you left behind, from what you said, you seem to have taken care of most of them with the insurance you have, and most credit cards have a debt forgiveness clause in case of unexpected death of a card holder, usually the debt is attached to their estate for settlement. Would be a good idea to see about adding insurance to any loans you may take out, you can ask about it when you sign the papers.

The rules could be different in Europe, so check with a lawyer over there to be sure, when you return there.

Answer 14

Their debts die with them.