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Here’s how unpaid debt is handled when a person dies - CNBC
For the heirs — typically the surviving spouse or children — the question often is what, exactly, happens to those obligations. The answer: It depends on both the type of debt and the laws of the state.
A person’s assets — no matter how meager or massive — become their “estate” at death. That includes their financial accounts, possessions and real estate. And, generally speaking, it’s the estate that creditors go after when they try to collect money that they’re owed.
- Creditors generally try to collect what’s owed to them by going after the decedent’s estate during a process called probate.
- There are instances, however, where the surviving spouse, or another heir, may be legally responsible.
- Some assets don’t count as part of a person’s estate for probate purposes.
For the heirs — typically the surviving spouse or children — the question often is what, exactly, happens to those obligations. The answer: It depends on both the type of debt and the laws of the state.
A person’s assets — no matter how meager or massive — become their “estate” at death. That includes their financial accounts, possessions and real estate. And, generally speaking, it’s the estate that creditors go after when they try to collect money that they’re owed.