“Americans Are Dying with an Average of $62,000 of Debt” – Fox Business 3/21/17. (1)
You’re probably going to die with some debt to your name. Most people do. In fact, 73% of consumers had outstanding debt when they were reported as dead (2). Those consumers carried an average total balance of $61,554, including mortgage debt. Without home loans, the average balance was $12,875 (2).
For the most part, your debt dies with you, but that doesn’t mean it won’t affect the people you leave behind. Debt belongs to the deceased person or that person’s estate. If someone has enough assets to cover their debts, the creditors get paid, and beneficiaries receive whatever remains. That’s the general idea, but things are not always that straightforward. The type of debt you have, where you live and the value of your estate significantly affects the complexity of the situation.
There are lots of ways things can get messy. Say your only asset is a home other people live in. That asset must be used to satisfy debts, whether it’s the mortgage on that home or a lot of credit card debt, meaning your family who lives there may have to take over the mortgage, or sell the home to pay creditors. Accounts with co-signers or co-applicants can also result in the debt falling on someone else’s shoulders.
Poor planning can leave your loved ones with significant stress. One way to make sure debt doesn’t make a mess of your estate is to consider getting life insurance and meeting with an estate planning attorney to make sure everything’s covered in the event of your death. Another thing to consider is, the law in your state of residence decides who gets what if you don’t have a will or designate beneficiaries for your assets.
Life insurance is a great way to provide additional money in the estate to pay debts!
(2) December 2016 data provided to Credit.com by credit bureau Experian