Are Debts Forgiven When Someone Dies?
- Debts do not die with the deceased. Although death creates an emotional burden on survivors, debts--and any money owed to the deceased--must be addressed. Even Uncle Sam will want his money, so tax returns must be filed, creditors contacted, plans made.
However, some debts are forgiven after the debtor dies; these can include credit card accounts and other credit accounts such as federal student loans. It is important to take a close look at the deceased's circumstances. - Every person leaves behind an "estate"--money, property, belongings and other assets such as life insurance or retirement accounts. The executor pays debts as necessary out of the estate. If there is not enough money in the estate, the executor and probate court liquidate property such as jewelry and artwork to pay debts.
- Relatives and heirs to the estate are not required to repay the deceased's debts. However, because the estate must pay back all debts required (not forgiven) and possible (assuming the money does not run out), the inheritance might shrink or disappear. Also, if you are a co-signer or co-owner on a debt with the deceased, you are generally responsible for at least a portion of the debt. Otherwise, heirs and relatives cannot be forced to pay, even if collection agencies try.
