It may be one of the most meaningful – and emotional moments in a traditional wedding ceremony. The bride and groom stand before their friends and family, and promise to love each other, no matter what. In most cases, they pledge to support each other through good and bad times, and through sickness and health. And then there’s the bit about supporting one another no matter how rich or poor they are. Now that is quite a commitment.
Judging by a recent study, the vast majority of Americans have significant debt. In fact, the study found more than 70 percent of Americans will not manage to pay off their debts before they die. Furthermore, the 2016 study found that the average debt, including mortgage someone owed at the time of his or her death, topped $61,000. The average amount excluding mortgage debt topped $12,000. And this begs a question. What happens to your loved one’s debt after he or she dies?
Debt is not automatically discharged when someone dies
Many people mistakenly believe debt is automatically settled upon someone’s death. This is not so.
Technically, the deceased’s estate is responsible for the payment of any remaining debt. In Nevada, state law mandates how this must be done. Specifically, the estate must first pay any outstanding “debts and charges” associated with administration of the estate, funeral expenses, and the deceased’s last illness. It must then pay “any family allowance,” and “debts having preference by laws of the United States.”
The deceased’s estate is also responsible for payment of any balance “owed to the Department of Health and Human Services as a result of the payment of benefits for Medicaid.” Additional obligations may include the payment of applicable judgments, certain wages, some mortgage payments, and any other relevant demands.
A similar law specifies how a deceased person’s estate must pay his or her outstanding debt in Washington. Payment of funeral expenses, costs associated with the deceased’s last illness, and certain wages have top priority. The estate must then pay “debts having preference by the laws of the United States,” and back taxes or any other debts owed to the state. When applicable, the estate must also pay the deceased’s judgment and mortgage debt.
More often than not, these debts will go unpaid if the estate does not have enough money to cover them.
You may be responsible for your loved one’s remaining debt
There are several situations in which you may be responsible for your loved one’s debt after he or she dies. It could happen if:
- The debt stemmed from a joint loan, a jointly held credit card, mortgage, and so forth.
- You live in a community property state
- You were married to the deceased and state law mandates that you pay a particular type of debt.
- You were the executor of the estate and failed to comply with certain state probate laws.
Nevada and Washington are community property states
In all, there are nine community property states, including Washington and Nevada. In these states, spouses share the legal obligation to pay each other’s debts –including credit card debt — providing one of them acquired the debt during the marriage. It does not matter whether the debt stems from an individual or jointly held loan, credit card, car loan, or any other financial obligation.
There is one important exception, however. You do not have to pay off any debt that your late spouse acquired before you were married. This is because it is considered “separate debt” and is not subject to community property laws.
Debt collectors are allowed to contact you about the deceased person’s debt
The federal Fair Debt Collection Practices Act (FDCPA), allows debt collectors to contact you regarding the deceased person’s debt if you are the deceased’s:
- Husband or wife
- Parent(s) (as long as the deceased was a minor child)
- Guardian,
- Executor, or administrator
In addition, collectors can legally contact anyone else authorized to pay debts with assets from the deceased person’s estate. Debt collectors are prohibited from discussing the deceased’s debts with anyone else.
If you are responsible for paying the deceased person’s debts the FDCPA also gives the right to ask the debt collector to cease contact. You must put this request in writing and keep a copy for your record. Once the debt collector gets it, he or she can only contact you to confirm receipt and let you know what else may happen.
Do not hesitate to call Debt Rescue Law at 833-707-1234 if you have any questions or concerns about a deceased loved one’s debt. If you do not think you should be responsible for payment, or a debt collector is hounding you about one, we are here to help.
