Having a parent die is difficult enough without creditors knocking down your door. It is not unusual for there to be medical bills, car leases or credit card debt. The creditors are going to start contacting you very quickly. Who is responsible for this debt? Here are some answers about what happens to the bills after someone dies.
When a person dies, their estate is “born.” That estate will have someone, known as the Personal Representative in Arizona, who will be designated by the will and affirmed by a court to handle all financial issues of the deceased, including their debts.
If you’re not in charge of an estate and get a debt collection request, direct the caller to the executor, then tell the caller you don’t want to be contacted about that debt again.
Credit Card Debt
In the case of the death of a parent or parents, the estate becomes responsible for the debt— not you.
The first thing to do in contact the credit card companies and the reporting agencies — Experian, Equifax and TransUnion — and request the account be flagged with the statement, “Deceased: Do not issue credit,” which will help prevent identity theft.
Caution though because people who request credit together are equally responsible for the entire debt. The same is true with a co-signer, who essentially guarantees the debt of the borrower. If the borrower dies, the co-signer becomes liable.
Authorized signers or additional cardholders on credit card accounts, however, aren’t liable. They didn’t originally apply for the credit; they were just allowed to “piggyback” on the account of the person who did. If that person dies, the authorized signers aren’t generally on the hook.
Don’t let the family swoop in and divvy up the valuables. Those items may need to be sold to pay debt or taxes. Only after all debt is settled may the assets be distributed.
You can ask creditors for help. If you are a joint account holder of the deceased’s credit card and are having trouble paying the bills, you can work with creditors and ask them to give you time to get organized and come up with a plan.
If an estate has more debts than assets to pay them, the estate is considered “insolvent” and creditors who have the right to start a probate to try and collect the debt, in reality will be forced to write the debt off.
If your parent was on Medicaid, the state can recover the payments it made from the time your parent was 55 until their death. They can place a lien on your parent’s home or may negotiate and let the executor pay less than the total due, however, they can’t ask you to use your own funds to pay the bill.
If your parent’s had their own insurance or no insurance and died with unpaid hospital or doctor bills, the estate is responsible for paying them, not you
If you inherit your parent’s home while it is still under a mortgage, you are responsible for making the payments going forward. The bank cannot force you to pay off the mortgage.
Your parent’s estate is responsible for paying any and all taxes due — property taxes, income taxes and federal estate tax.
Joint account holders are generally fully responsible for the entire debt, even if only one of them made all the charges.
The fact that heirs aren’t responsible for your debts, however, doesn’t mean your creditors won’t try to collect from them.
The above rules do not necessarily apply when the first spouse dies. In a community property state one spouse can be liable for the debts of another, even if they didn’t agree to them or even know about them. So in a community property state the surviving spouse may be on the hook for the credit card debt of a deceased spouse.
Ask for Professional Help
When in doubt, contact an experienced estate or probate attorney. With complicated estates, things can get very confusing and a good attorney can guide you through all the pitfalls.
Gregory C. Poulos
Poulos Law Firm, PLLC
11120 N. Tatum Blvd, Suite 101
Phoenix, Arizona 85028
Phone: (623) 252-0292