Does credit card debt have to be paid out of my estate after I die? What about unpaid dentist's bills?
When a person passes away, the decedent’s debts do not automatically pass to his or her spouse, children, or anyone else. Debts incurred by an individual are owed solely by that individual. If a person dies before his or her debt is paid, then the creditor can attempt to collect the debt from the individual’s estate, meaning that the debt would be paid before any money or other assets are passed to the heirs. However, if the person dies without sufficient assets to pay off the debt, then the debt is uncollectible and the creditor will likely write it off its books.
Although a surviving relative is not liable to pay debts of the deceased out of his own assets, the probate court may require that any property belonging to the estate be paid to creditors before the heirs receive any inheritance.
Frequently, creditors will contact the surviving relatives of a recently deceased debtor to try to convince them to pay the debt owed by their late relative, despite the fact that the relatives are not liable. These collectors will often say things like, “Don’t you think your father (or mother) would want you to honor his memory by paying this debt?”
They often try to insinuate that a legal obligation to pay the debt exists, saying things like, “But you’ve been making the payments, so it looks like this is your debt.” Sometimes, they even state outright that a relative is legally obligated to pay the debt, which in most cases is absolutely untrue. Under federal law, making untrue or misleading statements in an attempt to collect a debt is illegal.
When a person dies with a will, the will controls the financial affairs of the decedent’s assets, which is called the "estate." A will distributes assets, not debts. However, before any assets can be distributed to the heirs, all known debts must be paid by the executor. Therefore, the executor will sell assets in the estate to pay for any debts that remain. Only after the debts are paid will the remaining assets be distributed among the beneficiaries of the will.
If a person dies without a will, this is known as “dying intestate” in lawyer-speak. In this situation, the court appoints an administrator to handle the distribution of the decedent’s assets according to the laws of the state. As with dying with a will, assets are distributed after debts are paid.
Here is a key point that bears repeating: If the estate is insolvent the creditor has no legal right to collect the debt from family members, children, or friends. There is no feudal debt bondage that ensnares an entire family, at least not in the US.
You do not mention if you have a spouse. In most states, the creditor cannot collect from a decedent’s spouse. However, in community property states, the question becomes more complicated.
Community property states include Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Generally speaking, in community property states, debt incurred by a spouse for the benefit of the family is considered a “community” debt, and therefore the spouse is responsible for repaying that debt.
However, no two community property states use exactly the same laws. As a consequence, if you live in a community property state and have a spousal debt issue, it is imperative that you consult with an attorney in your state so that you understand your rights and liabilities in your particular circumstances.
You mentioned medical debt. Medical debt is unsecured debt, but in some states and in some instances medical debt is treated differently than credit card debt, a signature loan, or tax liability.
If a spouse, family member, or friend signs an admission form that included guarantor language when the treated person received the medical services, then that spouse, family member, or friend promised to pay for the treated person’s services if he or she fails to.
In some states, a spouse has liability for a debt related to a necessary medical procedure under a common law doctrine known as the Doctrine of Necessaries.
Consult with an attorney in the state where you reside who has experience in consumer law. An attorney will be able to advise you of your rights and liabilities others may have based on your state laws and the documents you signed before and during your medical procedures.
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