Most Americans pass away owing debt. What happens to that debt after they pass away?
It is not a secret that most Americans owe money to someone. The people of the U.S. are used to buying things on credit and, as a consequence, they have debts.
Most people would like to be rid of all that debt by the time they pass away. Unfortunately, the reality is that most of them will not.
Approximately 73% of people in the U.S. pass away while still in debt. The average amount of debt is $61,554, but that average goes down to $12,875, if mortgage debt is not included.
Market Watch discussed this in "What happens to your debt when you die?"
Because you are likely to pass away while still in debt, it is important to understand what will happen to that debt, to make sure it is not a burden on your family.
If it is debt that you alone are responsible for, then your estate will pay the debt out of any available funds before any assets are distributed to your heirs. If you estate does not have enough assets to cover your entire debt, then most types of debt die with you.
However, there are exceptions.
For example, any family member who still lives in a house with a mortgage would be responsible for the mortgage payments, if he or she wishes to stay in the home.
What this means is this: you should not worry about most debt being a burden to your family. However, if you wish to ensure that your debt does not eat up the inheritances of your heirs, then you should do some estate planning to avoid that.
Reference: Market Watch (May 29, 2017) "What happens to your debt when you die?"
If you would like to discuss setting up your Estate Plan with an experienced attorney at Simmons & Schiavo, LLP, call (781) 397-1700 or visit our contact us webpage.