While you may think that the cost of living is expensive, the alternative can be even worse. When a person dies, he or she leaves behind a variety of expenses in the form of credit card debt, mortgages, student loans, funeral expenses and more. So who’s responsible for paying?
A person’s estate—consisting of money and property that’s left behind—is often used to pay off debts, but let’s take a closer look at a few specific examples.
Credit Card Debt
This can get complicated and, simply put, sometimes the credit card companies lose. If the deceased was the sole owner of the credit card, then the debt cannot be passed onto another individual. Rather, the estate is responsible for paying off the balance, after which, remaining assets are distributed to heirs according to the deceased’s will (or state law if there is no will). If the estate itself cannot cover the bills, then the credit card companies may be out of luck. However, if the account was shared, then the co-signer becomes responsible for the debt that is not covered by the estate. An authorized user—one who did not sign the application and only has purchase authorization—is not responsible; only a co-signer of a joint account can gain such debt.
A secured debt is an outstanding loan that’s secured against an asset owned by the deceased, such as a car that isn’t yet paid off. If payments stop, the lender can repossess the asset. This means that the debt may not fall to another individual, but that the estate may take a blow by losing the asset. If the secured loan has a co-signer, that individual must keep up payments to prevent repossession.
A guaranteed debt is an outstanding loan that a second individual guarantees, essentially promising to continue payments if the primary signer no longer can. In this case, anyone who guarantees a loan on behalf of the deceased will be responsible for continuing to pay off the debt.
Prepare for the unforeseen. Call Loftis & Wetzel Corporation at (580) 363-3434 for more information on Oklahoma City life insurance.