Death and Debts
Total household debt in United States increased to 13.8 trillion dollars in 2007. This is an 8% increase over previous year and a 97% increase since 2000, when it was 7.0 trillion dollars [Source:crown.org]. In addition to poor money management skills, unforeseen events such as illness, accidents and death within the family can cause immense emotional and financial distress.
Many people may have to cut down on their hours or even quit work in order to care for an ailing family member. When an earning member of the family passes away, the situation can become particularly difficult, as medical bills and expenses incurred during the illness now need to be met with a reduced income. Expenses for funeral arrangements can also be significant. According to National Funeral Directors Association, as of July 2004, the average cost of a funeral was $6,500. [Source:nfda.org].
Added debt problems after the death of a loved one may occur due to:
- Transfer of debt to joint account holder: According to Federal law, the estate is used to repay all debts incurred by deceased. The estate is defined as everything owned by the deceased including assets and liabilities. The heirs of the deceased person are not liable to pay any personal debt of the deceased. However, if a person has a joint account along with the deceased, then he/she becomes responsible for debt incurred by the decedent.
- Transfer of debt to spouse in community property states: As a general rule, debt is only transferable in the case of joint accounts. However, in community property states any property, asset, credit accounts and income held during the period of marriage are automatically considered to be jointly owned. The debt incurred by one spouse is fully transferred to the surviving spouse, who then becomes liable for debts incurred during the marriage. The following states are community property states:
- Arizona
- California
- Idaho
- Louisiana
- Nevada
- New Mexico
- Texas
- Washington
- Wisconsin
It is also essential to plan for minimizing any financial impact to your family in the event of your own death. Some important steps you must implement early in life are:
- Make sure you have a ‘will’ that clearly states who should get what part of your assets
- Always carry adequate Life Insurance, and name the beneficiaries clearly
- It is easy to make provisions for your own funeral arrangements, but make sure they would be effective in the event of accidental death, particularly when you are traveling
Dealing with a legacy of debt can be traumatic. You may be feeling lonely and may not be able to find your way out of financial troubles. At , we have trained professionals to help you take the right steps while handling debts after the death of a loved one or to make sure that your own death will not add a financial burden to your surviving family. Our counselors fully understand your situation and offer you free counseling sessions.
