What Debts Are Forgiven After Death?

Grappling with financial debt is a problem that too many Americans deal with in life. Even posthumously. Over 73% of Americans die while owing almost $62,000 in debts. That means almost three out of every four people will die in debt. This is a serious problem because a lot of debt doesn’t disappear after death. Many people may think otherwise, but even death does not exempt you from paying back debts. 
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Anyone who jointly owed debts with you in life and the executors of your estate are responsible for paying back your debts. Your estate is everything that you owned in life. A spouse, anyone who co-signed a loan with you, co-owned a business or owned property and/or assets with you in life can be on the hook for paying back your posthumous debts.
However, there is also a lot of posthumous debt that is forgiven. Or just more legally difficult to collect after death. Before we discuss what kinds of posthumous death is forgiven, let’s examine what kinds of posthumous debts are not forgiven.

Unforgiven Posthumous Debts
Any surviving relatives, beneficiaries or estate executors can be on the hook for certain debts after your death. Secured financial debts are never forgiven after death. Such secured debts can include significant personal loans or mortgages. Collateralized loan assets, properties or even a house can be seized by a bank posthumously to satisfy debt obligations.
Even taxes are certain after death. In fact, tax payment obligations may even become more significant after death. Depending on where you live, estate tax laws may legally mandate the collection of taxes on all inherited and newly generated incomes. The overall value of the posthumous estate may also be subject to estate tax collection.
Anyone who co-signed for a personal loan with you is also responsible for the entire debt in the event of your death. Your death does not absolve any loan co-signer of their responsibility to pay back the debt in full.

Student Loan Debts
Generally, student loan debts are forgiven after death. Technically, student loan debt must be repaid regardless the circumstances. However, they are not aggressively pursued for collection after death. Privately secured student loans can be collected after death however. Paperwork verifying death should be sent to schools and lenders related to the student loan.

Credit Card Debts
Credit card debt is the sole responsibility of the person who own such debt during life. Unless such debt was cosigned by another individual, it cannot be transferred to surviving relatives, beneficiaries or an estate. Posthumous credit card debt is never really forgiven however. It is more that such debt is given up on in terms of collection. Credit card issuers can issue collection letters or calls requesting payment from the estate. However, the estate or surviving relatives have no legal mandate to pay back such debts.

Insurance Policies
Insurance policy payouts, like life insurance or retirement insurance, are not part of the estate. Unless such policies were legally earmarked for debt payments before death, they cannot be collected for debts. As long as the beneficiaries are specifically named for payout payments, such policies are safe from debt collection.

Estate Insolvency
If the debts attributed to an estate vastly outweigh an estate’s ability to pay them back, not much can be done to force debt repayment. As long there are no secured debts involving mortgages or property, there is not much debt collectors can do. In such cases, the expense required to collect such debt may be more than the debt itself.

Final Expense Insurance
One way to deal with unforgiven debts after death is final expense insurance. Final expense insurance is a form of life insurance that is used to pay for all of the costs associated with end-of-living medical expenses and funeral expenses. No medical exam is required, and approval may be immediate. Funeral insurance companies are relatively affordable way of taking the worry out of securing all end-of-life payments. Relatives can even apply for final expense insurances on behalf of loved ones in most cases.

Consult a Lawyer
Make sure that you enable legal provisions in your living will to protect your loved ones and estate from posthumous debt. Consult a lawyer as soon as possible since posthumous debt obligations can be a complicated legal area. Being as legally prepared as possible for all posthumous debt obligations will be worth it. It seems that the only thing more certain that death and taxes is debt after death.

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