After your death, what can happen to your money and debts?
Your debt is yours and only yours. Though your money can get divided amongst your relatives or children or can be given over to a trustee or orphanage (as per your wishes), debt that has been incurred by only you remain to be yours even after your death. However, various other nuances are considered in the case of the debt payments in the event of your death. This will depend on whose name the debt is and the type of debt, the date of payments on the debt, and so on. However, it is always better to pay off your debts from the beginning. If you are having problems making the debt payments, you can try the debt settlement option to lower the outstanding debt amount and solve the whole problem at the nip of the bud.
Debts and money after death
Your debt is never going to pass over to your family members in the event of your death. So, what is going to happen to your debts after you die? The state laws on this vary from one state to another.
In most of the states, if none of your family members co-signed a loan (any type) with you, even if it’s a mortgage or a car loan, then nobody is supposed to make the payments on that after your death. However, in the case of a mortgage or car loan, the lender can foreclose your home or car if you have not been able to pay off the same. So, if you had passed over your property or your car to your children and family and would like to retain the property or car, they will have to pay off the debts.
If there was a co-signer on such debts, the co-signer would be held liable for the payments in the event of your death. When another person co-signs on an account (any type), both you and the co-signer are supposed to be equally responsible for the debt payments.
As for POAs, a representative operating under a Florida power of attorney created by the deceased person is not responsible for any debts incurred by the principal prior to being granted authorization or for any commitments that fall outside of the area of their authority, unless they were a co-owner of principal's property or had a joint account.
- After the death of the debtor, the value of the estate and assets is calculated.
- After that, the executor analyzes the amount of debt owed by the debtor.
- Thus, the value of the estate is then calculated in which the value of all of your assets is included.
- All of these are used to pay off the creditors and the lenders.
- If the money is enough to clear off all of your debts, then well and good.
However, if the value of your property is not enough to clear off all of your debts, then the creditors and the lenders will have to be content only with what they get out of your property.
The executor gives all of the details to the court, and the court is appointed to sell all of your property. Thus, the money you have accumulated, your estate, and so on are used to settle your debts.
However, another thing that can change the whole scenario is the rule followed in the community property states. In a community property state, all the money can be divided into two halves between the spouses. Similarly, the debt incurred by one is considered to be a debt owed by another. Thus, if you leave behind loads of debt, your spouse will be held liable to pay off debts. But these debts will have to be those which were incurred during the years of your marriage.