FAQs: What Happens To Your Debt When You Die?

  • Estate Planning
  • FAQs
FAQs: What Happens To Your Debt When You Die? | Mario Godoy | Chicago Estate & Probate Lawyer

Many adults conscientiously save their money and carefully plan their estate so they can leave an inheritance to protect their family members. But if you have a lot of debt, your estate could be wiped out covering your debt, and your family could inherit nothing but your debt when you die.

According to Credit.com,

  • 73% of adults had outstanding debt when died
  • $61,554 was the average debt including mortgage debt or $12,875 in non-mortgage debt

According to Chicago estate planning attorney Mario Godoy,

In Illinois, the deceased person’s family is not responsible for their debt – but their estate is. If your spouse dies and is in debt, and you did not co-sign for this debt, debt collectors are not allowed to call you to demand payment. 

As your estate is responsible for your debt, there are actions you can take to protect your assets and your family after you die.

How to Protect Your Family From Debt When You Die

Leslie H. Tayne, a debt resolution attorney and author of the book Life & Debt: A Fresh Approach to Achieving Financial Wellness, told Huffington Post there are things you can do to ensure a smooth transition after you die:


  • Know the terms:
    Understanding the terms of your debts before you take them on is important in knowing what will happen to them when you die, Tayne said. “For example, read through the terms of a private student loan before taking it on to understand whether the burden would fall on your family if you passed away,” she said.
  • Keep good records:
    Tayne said it’s also important to ensure your loved ones know about all debts to your name, including who you owe, how much you owe and how to access your accounts. “This includes passwords and security login information so that your loved one can easily manage your affairs for you after death,” she said.
  • Maintain low balances:
    The best way to ensure your debt isn’t passed on to family is to maintain low balances when possible. So if you have debt sitting around that you can afford to pay down more quickly, consider getting rid of it sooner rather than later ― just in case. You might also want to avoid adding a co-signer or joint account holder unless absolutely necessary to prevent that liability from passing on to them.
  • Consider life insurance:
    A life insurance policy can help your family pay off your debts after you die. However, Tayne said the desire to have funds used this way needs to be communicated clearly in the policy. “This can be especially beneficial if the person you’re leaving your home to would have trouble making mortgage payments,” she said.
  • Consider legal help:
    “Consulting an estate attorney can help you understand exactly what will happen when you die, and what options you can pursue while you’re living in terms of your assets and your will to help avoid debt falling on your loved ones upon your death,” Tayne said.