Question by MomOfMEY: Question about debt when someone dies…?
I’ve been thinking a lot lately…we had a baby recently and I’m just trying to get all finances in order.
1. My in laws have lots of debt (CC’s…IRS back taxes…etc) and don’t have any equity or assets because of those reasons. If something happens to them, would we have to assume responsibility to pay their debt off?
2. My husband and I both have “enough” life insurance. My husband has student loans still and a couple of vehicles in his name. If something (god forbid!) happens to him, would they make me use the life insurance money he left me to pay off the debt?
3. We do own a home, have some equity in it…but it’s just in his name b/c of the type of loan we secured 3 years ago. What happens with that?
4. My husband co-signed for some student loans for his brother about 4 years ago. If something happened to his brother, would he be responsible for the debt (his brother has since married).

Any answers would be greatly appreciated :)

Best answer:

Answer by Judy
When someone dies, all creditors have to go through the estate to collect.
Credit card companies are last – if there is no more estate – they don’t collect.
I believe, life insurance to others can not be touched.
The house, if under this name, needs to be willed to you.

May I suggest one little thing?
Next time you go to the library to get your baby some books to look at, stop by the section of WILLS.
There are some books on wills that you can copy right out of, others that have a disk that let you print out the forms with your info.
Get your hubby to sign them at home, and then take them back to the library – THE notary will sign them for free.
BuY a fire proof box – don’t lock it, and tell a family member (that does not live with you) where the box is.
Also, I hope your hubby updated your child on the life insurance policy as a new beneficiary.
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Categories: Prepaid Legal Q & A

3 Responses so far.

  1. Jen M says:

    1)Any assets/life insurance payments your in-laws have would be used to pay off their debts. You are not responsible for the debts of someone who is deceased, unless you co-signed for that person.
    2)I really can’t answer this. I know that you and your child would receive SS benefits in addition to his life insurance, but I’m not sure what they would take in regards to his debts
    3)Does the deed have your name in addition to his name? Even if the loan is only in his name, your name can be on the deed. But, it would be your responsibility to refinance in your name, or you may be forced to sell the property.
    4)Any time you co-sign a loan, you are assuming responsibility for the other signer if they cannot pay. Brother’s wife would not be responsible if she is not on the loan, it would fall directly on your husband.
    These statements are just my understanding from things I’ve read.

  2. boilerette72 says:

    1. My in laws have lots of debt (CC’s…IRS back taxes…etc) and don’t have any equity or assets because of those reasons. If something happens to them, would we have to assume responsibility to pay their debt off?

    When they die the executor of the estate will file notice with the courts (probate). All debetors will need to make claims to the estate and get paid out from any assets (if any). Individuals will not be responsible for the debt, but you might not get as much inheritance if there is any assets left after being used to pay off debts.

    2. My husband and I both have “enough” life insurance. My husband has student loans still and a couple of vehicles in his name. If something (god forbid!) happens to him, would they make me use the life insurance money he left me to pay off the debt?

    No, because Life insurance stays out of the estate (as long as there is a beneficiary named) and will not go through the system above in question 1. Be SURE to name a beneficiary for your 401k and IRAs as well to keep them out of the estate and probate.

    3. We do own a home, have some equity in it…but it’s just in his name b/c of the type of loan we secured 3 years ago. What happens with that?

    Depends on your state. Many states have “community property” laws naming the spouse automatically co-owner regardless of any deeds/titles. You should either get your name on the deed/title (just go to the courthouse) or get a will drawn up (see a lawyer).

    4. My husband co-signed for some student loans for his brother about 4 years ago. If something happened to his brother, would he be responsible for the debt (his brother has since married)

    Your husband is resposnbile for the debt, period.

    Of course, this is my own personal experience and I make no claims to its accuracy. You should probably consult an attorney for guaranteed accuracy.

  3. andy says:

    1) No, if the estate isn’t liquid enough the parents debt die with them. The debt will be paid first after the State and Feds get their money.
    2) Yes they could since you are married and the vehicles will be joint property. The student loans may go away since they are in his name but a lawyer could answer that if the time comes
    3)It should go to you in the will, you do have a will correct?
    4) Yes since these are private student loans.

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