As estate planning attorneys, we are often asked: Does my debt disappear when I die? Unfortunately, in most cases, the answer is no. Your debt does not disappear when you die. Your estate (house, cars and other assets) is responsible for your debts after you pass away. But there is one exception to this rule. Only the federal government will wipe out federal student loans. Otherwise, creditors will still come after your estate after your death.
Common Debts That Stay After Your Death
While we hope that all our debts disappear after we die, that simply isn’t true. Below are some common debts left behind and how the creditors handle them after your death.
They say death and taxes are two things that are certain in life, but taxes after death is true as well. If you owe the IRS money when you pass away, they will take their share from your estate.
When you die, the mortgage on your house still needs to be paid. The executor of your estate can pay the remainder of the mortgage before the assets are distributed. Also, the executor can sell your house to pay the mortgage. Or your heirs may be able to work with the mortgage company to take over the mortgage and keep the house while continuing to pay for it.
- Credit Cards
If you owe money on your credit cards when you pass away, the credit card companies will petition the courts for their money from your estate. If there is not enough money in your estate to pay this debt, they will wipe away the rest. Your heirs are not responsible for your credit card debts, but they may not receive all the money from your estate since it goes to the creditors.
- Medical Bills
Medical bill creditors follow suit with other creditors; they will petition the court to have your estate pay the debt. If you owe a small amount, they may write off the debt instead of trying to track down the money.
But there are ways to protect your assets after your death. Talking with an estate planning attorney will help you decide how to protect your estate from creditors after you pass away.
Oak Brook Estate Planning Attorney
If you have questions about protecting your assets from creditors after your death or other estate planning topics, please contact us to schedule a free consultation. To learn how an estate planning lawyer could help you, call us for a consultation at 630-864-5835.
Areas we serve: Cook, DuPage, Kane, Lake and Will counties.