The poverty rate among seniors is rising, giving rise to the question of whether or not it is possible to inherit debt.
In general, when a loved one passes, his or her debts fall to the estate to be paid. However, in situations where debt is shared -- for example, jointly owned credit cards -- the debt can pass to the account co-owner, even if he or she was unaware of the debt.
This is why it is important to consider debt planning as part of your overall estate planning process. Here are some tips on dealing with debt:
By law, everyone is entitled to one free credit report every year from the three major credit reporting agencies: Equifax, Experian and TransUnion. Spouses should obtain and share their credit reports with each other so they are informed about any debt issues that could impact their estates. If debt will potentially impact adult children, be honest with them about your financial situation as well.
Seek the counsel of a lawyer or financial professional on your debt issues and how to resolve them. Deal with personal debt before it can become a potential issue for your family.
Ideally, all your estate and financial planning documents should be in one place and your family informed about where to find them. Among these documents should be an updated list of current assets and debts, including financial institution information, account numbers, and passwords.
Heirs should educate themselves about what types of debt will need to be repaid and what may be cancelled or forgiven. Generally, any unsecured debt held in the deceased person’s name alone -- credit cards, student loans, etc. -- will be discharged. While debt collectors have the right to attempt to collect on the debt -- and may contact survivors to try to “guilt” them into paying -- being educated about liability for debts after death will arm you with the knowledge you need to respond appropriately.
This article is a service of the Law Office of Keoni Souza, LLC, an estate planning law firm in Honolulu, Hawaii. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by contacting our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.
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