The type and amount of the debt left behind when someone dies is key to what happens next, according to "Americans Are Dying with an Average of $62K of Debt."
Because 73% percent of Americans pass away with debt that amounts to an average of $62,000, it is important to understand the complexity of the issue.
The only type of debt that completely disappears when the debtor passes away are federal student loans. However, the proper paperwork must still be filed in order to discharge the debt. The same is not necessarily true of other types of student loans.
Other types of debt must be paid by a decedent's estate before any assets are distributed to the beneficiaries.
Thus, if a person passes away owing $100,000 and having assets of $150,000, then the estate must pay the debt and only the remaining $50,000 can be inherited.
If the estate does not have enough assets to cover the full amount of the debt, the heirs are not responsible to pay it. However, there are exceptions. For example, if the estate contains a home, then the value of that home might be used to pay the debt, even if other people are living in it. As a result, the heirs might need to pay the debt to stay in the home.
An experienced estate planning attorney can help you create an estate plan that fits your unique circumstances as well as manage what happens to any debt left behind.
Reference: FOX Business (March 21, 2017) "Americans Are Dying with an Average of $62K of Debt."