Dying debt free in Los Angeles may be a goal, but it's often not a reality. In many states, leftover debt following a person's death is an estate's problem, not a direct concern for heirs. In California, community property laws sometimes force surviving spouses to pay a deceased spouse's bills.
Certain debt ownership circumstances affect heirs, in and out of California. The death of a joint debt holder or co-signer shifts liability to the surviving debtor. Some loan agreements and estate plans acknowledge the hardship a surviving joint debtor faces. An executor or estate administration representative can tell you whether a decedent's estate provides debt coverage for these bills.
Community property laws may not require an heir to pay all the debt left behind by a deceased relative. Creditors probably will attempt collection anyway, even when debt is not your responsibility. An estate planning attorney or estate administrator will identify which debt does and does not belong to an estate.
One of the many duties a California executor performs is letting creditors and affected businesses know a person has died. The Social Security Administration and credit reporting agencies are on the list. The agencies will ensure credit is no longer issued, which discourages identity thieves.
While spouses may be responsible, authorized users of a decedent's credit card are not liable for debt. You shared the use of credit but carry no burden for it. Don't invite fraud charges by continuing to use the card after the decedent's death.
Curb the urge to divide assets before the estate settlement. Estate assets and debts must be balanced before beneficiaries are eligible for inheritances. When debts are higher than estate assets, there may be nothing to divide.
Community property laws affecting the responsibility for estate debt are complicated. It's advisable for heirs to contact financial and legal professionals before taking any action, however well-meaning, affecting an estate.
Source: moneytalksnews.com, "Debt After Death: 10 Things You Need to Know" Trisha Sherven, Oct. 07, 2013