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What Happens To Your Debt When You Die?

Maybe you’ve wondered about your own debt or perhaps your parent’s debt—what happens to that debt when you (or they) die? Well, it depends, and that’s part of the reason you want to ensure your estate plan is well prepared. How you handle your debt can greatly impact the people you love.

In some cases, you could inadvertently leave a reality in which your surviving heirs—your kids, parents, or others—are responsible for your debt. Alternatively, if you structure your affairs properly, your debt could die right along with you.

According to the Federal Trade Commission, an individual’s debt does not disappear once that person dies. Rather, the debt must either be paid out of the deceased’s estate or by a co-creditor. And that could be bad news for you or the people you love.  

 What exactly happens to this debt can vary. One of the purposes of the court process known as probate is to...