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Debt After Death: How to Avoid Passing Debt on to Your Loved Ones

Posted By:  |  February 12, 2014  |  0 Comment(s)


Many people assume that once they die, their debts die with them. Unfortunately, this is not always the case. American seniors are now carrying more debt than ever, and if not dealt with properly, this debt can eat into your estate after you die and even destroy any inheritance that you planned to leave to your loved ones. In order to keep the next generation from having to deal with your debts, here’s what you need to do.

Know Your Legal Rights

The first thing to do is to be fully aware of the legal rights of your estate. Sometimes creditors will come after next of kin after a death, trying to gain payments that they may not be entitled to. In order to avoid this type of ordeal, you and your loved ones should fully understand your legal rights when it comes to debt. It’s important to know that, generally speaking, your next of kin are not required to pay off any outstanding debts that you owe after you die. However, there are some exceptions. First of all, any assets (such as properties, vehicles, bank accounts, etc.) that are part of your estate after you die must be used to pay off any outstanding debts you owe before the estate can be disbursed among your beneficiaries. Also, if anyone was a co-signer on a loan that the deceased person owes money on, that co-signer could be responsible for paying off the debt.

Hire Professional Help

Estates and legal rights can be very complicated, especially since laws are different in every state, so if you’re really concerned about passing on debt to your loved ones, it’s best to hire professional help. A qualified estate planner can help you write your will and plan your estate in such a way that you will minimize the financial burden that is passed on to the next generations.

Make Sure You Are Properly Insured

Another way to protect younger generations against paying off your debts is to have adequate insurance. Both life insurance and loan protection insurance policies can be used in this circumstance. For more on insuring yourself against passing on your debt, you can talk to a representative of a reputable insurance company.

Start Paying Off Your Debt Now

Perhaps the simplest way to ensure that your debts are not passed on is to start paying them off as soon as you can. If you’re worried that your next of kin will be forced to look for debt relief, you can help them by paying off as much of your debt as you can right now.

If you’re concerned that your debts will haunt future generations, planning for your future will make a huge difference. It can be extremely difficult to deal with estate debt if that debt has not been handled properly. Additionally, creditors or even fraudsters may try to take advantage of families that have recently lost a loved one, so it pays to learn about your rights and make sure that your estate is properly set up for debt management.

If you’re struggling to pay debt on your own, and need some outside help, we’ve reviewed a bunch of debt relief companies that might be able to give you a hand.


  • How important is it to you for a debt consolidation company to offer financial education resources?
  • Takes your existing debt and try to settle with your creditors for a lower amount. If you pay off the settled amount, your debt will be considered paid in full.
  • Negotiates with your creditors on your behalf.
  • Fee based on a percentage of your total starting debt or a percentage of the debt they save you.
  • Most settlement companies have you create a separate "escrow" account where you will make monthly contributions over a certain amount of time to contribute to your settlement. Once there is a substantial amount of funds to show your creditors, the settlement company will try to negotiate a lower amount of debt.
  • Combines all your debts and creditors into one monthly payment.
  • Allows you to pay one monthly payment to the consolidation company, instead of multiple payments to different creditors.
  • You no longer owe your original creditors; instead you pay one monthly payment to your consolidation company.
  • Consolidation companies can help negotiate lower interest rates on your debts and help lower your total debt payment in the long run. A lower interest rate will lower the amount you owe in the end.
  • Allows you to consolidate all your different debts into one personal loan that can be paid off over time.
  • Can offer borrowers a lower interest rate with a longer payback term (compared to high-interest credit cards or medical bills). This will lower the amount of money required to pay off the loan over time.
  • Personal loan debt consolidation can be an effective way to raise your credit score quickly (within 3-6 months).
  • Borrowers can receive funds from their loan within only a few days.

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