Many who live in California have some type of estate plan or will in place to cover their assets when they die. This can determine who takes care of any minor children they have, who gets their retirement funds or what happens to the family pets. The opposite side of that is the idea that someone can pass down debt after death.
Types of debt affect who pays it
Debts are not always passed down to surviving family members, and at times, creditors may collect what an estate owes them before it goes through probate. Despite this, there are times when family members and loved ones can be left responsible for debt after someone dies. U.S. News & Word report lists several different types of debt and what happens to it when a person dies.
If there is a mortgage and the deceased took out the loan with another person, the surviving borrower is then responsible for paying the debt. One way to protect loved ones from paying this debt is to have a life insurance policy that covers the balance.
Student loan debts are often forgiven when someone dies if they are through the federal government. The estate or a co-signor on the loan must pay private student loans if there is one.
Collection agencies or care providers make the decision on medical debt. If the amount owed is small, they may just close the account. If the amount is larger, it is more likely that they will try to collect from the estate.
Protect loved ones left behind
An estate plan and a life insurance policy are good first steps in protecting loved ones left behind when someone dies. This alleviates the financial strain that can often accompany the grief of losing a loved one.