Understand who pays what
In most cases, beneficiaries or heirs are not held personally responsible for paying off your loved one’s estate debts out of their own pockets.
As part of the probate process, the executor of the estate is responsible for handling outstanding bills.
Because debts do come out of the total value of the estate, there may be less money for heirs or beneficiaries to inherit.
In some specific cases, state law may require you to personally pay off a particular debt.
It is recommended to consult an estate or probate lawyer who can give specific advice on your loved one's estate.
After someone close to you passes away, the thought of possibly having to pay their bills can be scary, adding to your grief and possibly making you feel overwhelmed. It’s very common to wonder: Will I be required to pay off medical, credit card, or loan debt? Am I going to be responsible for all the bills that have piled up since my loved one died?
The short answer is no. In most cases, heirs are not held responsible for paying off the debts of someone who has died. That debt typically falls to the estate. As long as the value of the estate is greater than the total debt, the estate is considered “solvent” and all outstanding bills will be paid from it.
Paying the bills from the estate
The executor pays off these outstanding bills as part of the probate process. State laws determine how debts will be paid, with the money coming out of the total value of the estate. So while the heirs are not directly responsible for paying off the debts of their loved one, payment will be taken out of the estate, reducing the amount they inherit. Whatever is left over is then distributed according to the instructions in the will.
The same is true even for smaller debts like utility bills. Things like cable, gas, electricity, etc. are solely the responsibility of the person named on the utility account. Unless and until the heirs inherit the property and choose to take ownership of it, they are not responsible for paying the bills. As with larger forms of debt, payment for those bills comes out of the estate.
That said, surviving heirs do typically take on the responsibility of contacting the utility companies to inform them of the death of the account owner and to close the account or put it in someone else’s name. You may choose to do this yourself—but this is also the sort of task that anyone can do as long as they have the correct information, so you may delegate it to another relative or friend. They will likely need personal information like your loved one’s account number and their Social Security number, as well as a copy of the death certificate, in order to close or transfer the account.
What if the estate can’t pay the bills?
On the other hand, an insolvent estate is one that doesn’t have enough assets to pay off the person’s outstanding bills. In the case of an insolvent estate, the executor has to prioritize certain bills over others according to state and federal laws. These laws clearly outline which creditors have to be paid in full, which ones will only get partial payments, and which one won’t get anything at all. The companies that don’t get paid in full are typically able to write off their losses.
Unfortunately, if an estate is insolvent, the beneficiaries typically won’t receive an inheritance, but on the bright side, they also bear no responsibility to pay off the outstanding debts on their own. If for any reason you are in a complicated situation and unsure about your options, it’s always safest to consult with a lawyer to make sure you cover all your bases.
Even if an estate is solvent, there are certain exceptions in which an heir rather than the estate might have to pay the bills. If an account was jointly co-owned or co-signed, or if you live in a community property state, or when specific laws—like filial laws—require heirs to cover the outstanding debt, you may be responsible for an unpaid balance. If you find yourself in one of these situations and are unsure about your liability, it is always a good idea to seek the advice of a lawyer.
If heirs choose not to pay off or refinance a home or car, those assets can be reclaimed by the mortgage lender or creditor.
In the case of a joint account that was co-owned, the surviving co-owner assumes full responsibility for the account. Thus if you owned a credit card jointly with the person who died, you are responsible for paying off the balance. The same is true for a co-signed agreement. However, if you are simply listed as an “authorized user” of a credit card, this is not the same as being a joint owner of the account, and you will typically not be held responsible for paying off the balance.
If your spouse died and you live in a community property state, you may be required to use your jointly owned property to pay off any outstanding debts left by your spouse. The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. (Those who live in Alaska, South Dakota, or Tennessee can opt in to community property, but it is not the default.)
Secured debts like mortgages or cars can work a little differently from other debts. If heirs choose not to pay off or refinance a home or car, those assets can be reclaimed by the mortgage lender or creditor. Additionally, if one of them inherits this property or takes it as their share of the estate, they also become responsible for any outstanding bills.
There are some cases where state law holds surviving relatives other than a spouse responsible for certain debts. For instance, “filial responsibility” laws state that a person’s adult children can be held responsible for covering their basic necessities, including medical expenses up to the point of death. Fortunately, filial responsibility laws are not commonly enforced, although they do exist in over half of US states.
Low and middle-income families don’t usually have to worry about filial responsibility as long as their parents applied for Medicaid. However, if a parent does not qualify for Medicaid and extensive care is needed, and if their adult children are determined to have enough money to cover the expenses, this can change. As of 2020, these 27 states and Puerto Rico can hold adult children financially responsible for their parents’ bills to some degree, so make sure to research the specific laws in your area if you think this situation applies to you. If you are unsure, reach out to an accountant or a lawyer who can help you understand your options.
As you grieve the loss of your loved one, try to remember that you are unlikely to go broke paying off any of their outstanding debts. Pace yourself. If you really feel overwhelmed, there are resources to help you deal with exactly this situation. Reach out to friends and family for support and, whenever appropriate, seek professional and legal guidance to help you navigate the complexities of the situation.
You may be eligible for free bereavement support. Empathy can help with everything from funeral planning to estate administration, with step-by-step guidance and real-time expert support. Many people get free premium access to Empathy as a benefit with their life insurance claim. We partner with New York Life, Guardian Life Insurance Company, Bestow, Lemonade, and other leading carriers. When you make your life insurance claim, talk to your representative about whether Empathy is a benefit they offer.
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