Generally, when people think about estate planning and administration, it’s in relation to how a person’s property, money and other assets are divided up and bequeathed to heirs and other beneficiaries. However, what happens to a person’s debts when they die? That generally depends on the type of debt, what state the person lived in and whether or not there is a surviving spouse.
Usually, a person’s debts are paid from his or her estate during the probate process. Some assets, however, do not have to be tapped to pay outstanding debts because they don’t go through probate. These generally include any type of account or insurance policy that has beneficiaries. Retirement and brokerage accounts are two examples.
California is a community property state. That means that if a person is married at the time of death, any debts acquired after marriage are the responsibility of the surviving spouse. That’s true even if the debt was only in the deceased person’s name.
If you are doing your estate planning, it’s important to discuss any outstanding debts with your attorney, particularly if you don’t believe you’ll have the assets in your estate to cover them.
If you are a surviving spouse or family member administering an estate, you should discuss the handling of any outstanding debts with an estate planning attorney. Unfortunately, some unscrupulous collectors go after surviving family members to try to get money that they may not be legally entitled to collect. Every state’s laws are different, so it’s essential to seek guidance from an experienced California estate planning attorney.
Source: Forbes, “What Happens To Your Debt After You Die?,” Steven Richmond, Next Avenue, accessed July 15, 2016