Americans live in debt and they are dying in debt as well. In fact, they are dying with an average of $62,000 of debt
“You’re probably going to die with some debt to your name. Most people do. In fact, “73 percent of consumers had outstanding debt when they were reported as dead, according to December 2016 data provided to Credit.com by credit bureau Experian. Those consumers carried an average total balance of $61,554, including mortgage debt. Excluding home loans, the average balance was $12,875,” Credit.com reported.
So what happens to your debt when you die?
Most often the debt will fall to your survivors, unless, of course, you have a plan — a plan to handle your debt once you’re gone. “It’s called estate planning and will involve you writing out a will, which is a basic document explaining who gets what and who’s in charge of your estate after your death,” Credit.com reported.
Your appointed personal representative or estate executor will be responsible for dealing with your creditors and paying them from your estate.
“There are situations where heirs may not receive anything. This is because the deceased’s debts outweigh their assets. In that case, creditors may not receive anything, either. That’s because creditors can make legal claims against the estate, but they can’t go after your inheritors. Once the estate’s money is gone, there’s nothing left to pay them. But the good news is that they can’t go after your loved ones to make up any difference,” TK reported.
What kind of debt do people leave behind: credit cards, $4,531; auto loans, $17,111; personal loans, $14,793; and student loans, $25,391, according to CBS News.
When having major debt like most Americans are holding, getting ready for the future when you aren’t here is important.
“If you don’t write a will, your state of residence will write one for you should you pass away,” said James M. Matthews, a certified financial planner and managing director of Blueprint, a financial planning firm in Charlotte, North Carolina. “Odds are the state laws and your wishes are different.”
It can also get expensive to have these matters determined by the courts, and administrative costs get paid before creditors and beneficiaries. If you’d like to provide for your loved ones after you die, you won’t want court costs and outstanding debts to eat away at your estate.
