Death and Debt, Who Pays Mom's Bills?
Jan 21, 2015
“Well, Mom’s dead. So no, she will not be paying this month’s credit card bill.” In this day and age it is not uncommon for an elder person to have more debt than assets. Due to their fixed income, the debt collectors can’t touch them. What about after they pass away? What happens to the bills and who has to pay them?
THE EASY ANSWER
The only one responsible for mom’s bills is mom. When mom passes away, all of her property is required to go through the probate system. This is the court process where the family has to publicize mom’s death and give notice to all of her creditors of the assets mom had at the time of her death. The creditors have a certain amount of time to file a claim on the estate in order to receive payment. The law requires the creditors’ claims to be paid before anyone else. If the estate runs dry before the bills are paid off, the creditors are out of luck. The important part is the children of the deceased are not responsible for the debts.
THE COMPLICATED ANSWER
The general rule that the children of the deceased are not responsible for mom’s debts has some exceptions. First, if a child co-signs for any of mom’s debts before her death or at the time of her death. As an example, if you are an authorized user on one of mom’s credit cards, you are probably also a co-debtor on the credit card as well. When mom dies, it is now 100% your debt.
Funeral homes are very aware that mom’s estate may be too small to pay their high funeral costs. Since they deal with this on a daily basis, they have found a loophole. When you sign the dotted line retaining the funeral home for mom’s funeral, you agree that mom’s estate will be responsible for the bill and that you personally are responsible for the bill if not fully covered by the estate. Ouch!
WHAT ABOUT LIFE INSURANCE
If mom has a life insurance policy and a lot of debt, she should make her kids the beneficiary of her policy and not her estate. If she makes her estate the beneficiary, the life insurance goes into the estate that is required to pay the bills. If she makes her kids the beneficiary, the life insurance goes directly to the children and the bills are left out to dry.
Don’t worry - you are not required to pay mom’s credit card or medical bills when she dies. At the same time, be careful you do not co-sign for mom’s debts or funeral expenses because that will come back to bite you. All this said, it might not be a bad idea for mom to talk with an attorney to see if there is a way to get rid of the debt all together so the kids can receive an inheritance.
Pedersen Law Office offers free consults in all of our areas of practice and will meet with you and mom personally to discuss your specific circumstances and see what options are available for you. Our law office serves the communities of Appleton, Neenah, Menasha, Oshkosh, Green Bay and their surrounding areas.