Although it’s never a pleasant thing to think about, you might wonder what happens to your debt after you die. Debts can be complex, but you don’t want to leave them to your family in California to have to deal with in the event of your passing. When you have the right information, you can take steps to ensure your loved ones know what to do with the debt.
Do debts get inherited when the debtor dies?
During the estate administration and probate process, some debt can be inherited after the debtor’s death. Most of it passes to someone else, but not all of it does. Knowing which debt can be inherited and which cannot can help people to better prepare and know what to expect.
What happens to different types of debt after death?
Different types of debt are treated differently after the death of the debtor. It’s important to know these debts and what happens with them during the estate administration and probate process. The different types of debt include the following:
- Credit card and student loan debt: These are both unsecured debts. Credit card debt is not inherited after the debtor dies. Your estate will not have to pay the debt and it cannot be passed to your spouse or children. The only exception is if you have a joint account with your spouse or child. If you have student loan debt, however, it passes to your spouse.
- Medical debt: Your spouse may inherit your medical debt, but your insurance and estate can determine what happens with it after you die.
- Car loans and other secured debt: Car loans and other secured debts usually don’t get inherited unless you had a cosigner. If you were still paying off a car loan at the time of your death, your estate will have to pay it off. If your spouse or child decide to keep the car, they are then responsible for paying the debt. This also applies to a mortgage.
How can you protect your loved ones from your debt?
If you want to protect your loved ones from being responsible for your debt after your death, there are steps you can take. A prenuptial agreement can protect your spouse from having to pay back your debt in the event of your death. However, you may be able to find better solutions by speaking with a professional.