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Surviving loved ones are often left wondering what happens to the debts of their deceased parent or relative. The answer to this question depends on several factors and circumstances, as explained herein.

So, who is responsible for the debts of a deceased person?

When a person dies, their estate is responsible for settling their debts. An appointed executor usually contacts all creditors to inform them of the debtor’s death and handles all the financial accounts and closing of debt obligations.

If the deceased did not appoint an executor or write a will, the State steps in by assigning an administrator. Family members of the deceased do not have to take up any remaining debts. 

If the money in the estate is not enough to pay off the debt, the State will consider the estate insolvent, and the debt will go unpaid. The only exception is if the debt was under multiple names. The debt will pass on to the remaining signatories.

Can I be liable for the debts of a deceased parent or relative?

Even though family members do not have to pay off a deceased’s debts, there are instances in which they can still be liable.

• If you were a co-signatory of a loan with the deceased or you hold a joint credit account, you would continue to repay the debt even after the other person dies since the debt is under your name as well.

• If you are the deceased’s spouse in a community property state such as Arizona, Texas, Nevada, California, New Mexico, Washington, Idaho, Wisconsin, and Louisiana, half of your property could be used to pay off any debts incurred while the two of you were married.

Who is responsible for the mortgage of a deceased person?

If the mortgage loan were solely under the deceased’s name, the estate would be responsible for closing the debt. If the estate’s money is not enough to clear the balance, the remaining option is for the estate executor or administrator to sell the property to pay off the debt. 

If the mortgage was held jointly with a surviving spouse or partner, they are responsible for remaining payments and must continue meeting their monthly obligations accordingly.
 

Can life insurance payouts pay back debts of the deceased?

Life insurance payouts and retirement benefits are not part of an estate. For this reason, they are not liable to pay off any debts of the deceased. By law, creditors cannot deduct their money from life insurance payouts or retirement benefits.

Responding to debt collectors if you are not liable 

You will notice that creditors and debt collectors will continue reaching out to you, hoping to get paid. As you know, family members are not liable for any debts left behind by a deceased parent or relative. 

However, some family members may opt to pay the debt of their deceased loved one, which they are not liable for, but doing so is voluntary. If you choose to decline to pay and continue receiving messages from debt collectors, consider contacting a debtor attorney for legal assistance.