Burlington elder law attorneys can provide you with help in making a financial plan so you can achieve financial security by growing and protecting wealth. Unsworth LaPlante, PLLC will work closely with you to understand the rules for tax-advantaged accounts like IRAs so you can maximize the tax help you receive and invest more for your future. We also assist you in taking proactive steps to protect your wealth so you can keep your nest egg secure. 
While our legal team helps you to set and achieve financial goals, often life circumstances make managing money difficult and result in you dying with debts. In fact, according to Time Magazine, research shows that the majority of Americans die with significant debt. If you pass away and still owe a lot of money or if your loved one has died in debt, you need to understand the implications associated with owing money from beyond the grave. Burlington elder law attorneys can explain what happens to debts after you die and can assist you in making an estate plan aimed at protecting wealth from creditor claims. We also provide representation to heirs or beneficiaries when their loved one passes away with a lot of debt.
What if You Die in Debt?
According to Time Magazine, around 73 percent of all consumers die with debts and the average total balance that remains after death is $61,554. This includes mortgage debt as well as unsecured debt such as credit card debt. Credit card debt is actually the most common type of debt that people die with, although many also pass away with car loans, personal loans and student loans as well.
If you are one of the majority of Americans who dies with debt, or if your family member passes away while still owing money, knowing the rules for debt collection is important. These rules will vary depending upon the type of debt owed, among other factors.
If you pass away and have federal student loan debt, the outstanding balance will be forgiven – although there are tax consequences. If you pass away with private loans, however, it is possible that the debt owed will not be wiped out depending upon the lender. If a surviving person was a co-signer to the student loans of the deceased person, the co-signer will generally still be responsible for the debt, which means it will not just go away when someone has died even if the person who passed away was the individual who actually obtained the education.
If you have other types of debt, such as personal loans, car loans, credit card debt, auto loans and a mortgage, creditors can make claims on the estate assets. Money and property in the estate could be used to repay creditors instead of going to heirs or beneficiaries. This can happen regardless of what the deceased person had in his will, because of the rights of creditors to try to collect from the estate. In certain circumstances, if the deceased person received Medicaid benefits, the state could also become a creditor and try to recoup money spent on those benefits out of estate assets.
If there is not enough money in the estate, then the debt will likely not be collectable any more unless there was a co-signer. If there was a co-signer, that person is wholly responsible for paying any outstanding balance on the debt. If there was no co-signer and there aren’t assets in the estate to pay back the creditors making claims, those creditors will simply not be paid and will have to write off the debt. While creditors sometimes try to convince heirs to pay for the debts of their deceased family members, there is no obligation to do this and creditors cannot go after the children or other heirs of a person who has passed away to try to collect unpaid balances.
However, it is important to note that if the heirs or beneficiaries want to keep a secured asset like a home or a car, they’ll have to assume responsibility for repaying the loan.
Getting Help from Burlington Elder Law Attorneys
Unsworth LaPlante, PLLC can help heirs or beneficiaries whose loved one has died in debt. Our Burlington elder law attorneys can also assist with making a financial plan and an estate plan to try to reduce the chances that you will die in debt or that the legacy you are leaving for your loved ones will be lost due to your debt balance.
To find out more about how our legal team can help you, join us for a free seminar. You can also give us a call at (802) 879-7133 or contact us online to get personalized advice on all of your estate planning needs.
- How to Apply for Senior Medicaid in Vermont - December 11, 2022
- Planning for the “Silver Tsunami” - November 1, 2022
- Discharge of Indebtedness Income and Student Loan Forgiveness - October 27, 2022
