When you die, how will take care of your debts? If you have a large amount of debt and your spouse or other family members would be overburdened by trying to pay for them, you may feel a tinge of guilt considering that they might have to pay for those debts. However, you can breathe a sigh of relief knowing that no spouse or family members would be automatically made responsible for your debts once you pass on.
In gener
al, the debts you have are paid for out of your estate. So, any bank account, property holdings and other assets you own would be used to pay for the debts. The most impending debts would be paid first- those that are late or almost due. The money from your accounts would be funneled directly into debts to pay them off. If more debts remain afterwards, then your property would be sold off to pay for them. This may occur at an auction where buildings, land and personal possessions would be sold until all debts are covered.
Your spouse or family members may have some say in what is sold off and how much is sold off. They may have personal connections to some of your property or they may need that property for their own well-being. In those cases, they may opt to pay for some of your debt in order to keep your possessions.
Despite what your will states about who gets what part of your holdings, if you owe debts that your assets cannot cover, that property may be sold to cover the debt. Those assets aren’t really yours to divide up until all your debts have been paid.
If there are still debts to be paid once all your assets are sold off and used up, then those debts will be paid by the estate of the deceased. Only then can any belongings from the deceased be given to the deceased’s family.
In that sense, you may want to be concerned about your debts and their effect on your family. There may be items you want to will to certain family members or money you want to leave behind. However, that won’t happen unless your debts are taken care of. If you want to ensure that certain items are given to family members upon your passing, you will need to make those arrangements before you pass on and ensure those items have been gifted before your will takes effect.
Obviously, these are pointers meant to provide a general overview of the possibilities. An estate planning attorney is the best solution when you need firm answers.