Have you ever wondered what would happen to your debts if you passed away before paying them off? Will your loved ones be obligated to pay your debts or will they simply disappear? Every person’s debt landscape is different, and the best approach is to create a tailor-made estate planning strategy to make sure your debt doesn’t come back to haunt your family after you’re gone.
Student loans: If there is enough money in your estate to pay off your student loans, certain student loan collectors can make a claim against your estate. Federal loans are generally discharged upon death, so you won’t have to worry about those. But, any co-signers on your loans will still be held responsible for your student debt.
Credit cards: Much like student loans, credit card companies can make a claim against the estate. In addition, outstanding credit card debt is not transferred to family members with the exception of community property states or if you jointly held the credit card, say with a sibling or a spouse.
Mortgages: Mortgage debt is the type of debt most likely to fall upon your family members after your death. This is because mortgages are secured debt, unlike most credit cards or student loans. Although the personal obligation to pay a mortgage debt may expire upon your death, the security interest in the property can only be extinguished by repayment of the debt.
Other types of debt include car loans, personal loans, tax debt, and child support. Each person’s debt is different, so your best bet to avoiding your debt falling on your loved ones is to work with us to develop a tailored strategy to deal with your unique set of circumstances.