Have you ever wondered how your heirs will handle your debts when you pass away? The answer to that question is one that many people don't think about. Some people think that debts are simply erased when a person dies; however, that isn't the case. When you pass away, your heirs will be left dealing with the credit card companies and collection agencies. Our readers in Florida might be interested in learning more about debt collection and estates.
One thing that you should think about, simply for the purpose of thinking like the credit card company, is that once you aren't here, there is no threat of damage to your credit report. That sometimes means that creditors will accept smaller settlements from your estate than they would from you while you are alive. Immediate payment, even at a discounted rate, means they won't have to turn the account over to a collection agency. That could ultimately save the credit card company money.
It is equally as important for your heirs to know that they can't be bullied or abused by debt collectors who are trying to get paid. Some will play on emotions or try to stretch the truth. That isn't acceptable. From a legal perspective, if an estate doesn't have the money to pay a bill, the heirs aren't held liable for that bill. Of course, that could be affected by fiduciary liability, but only if an heir is a personal representative or executor who has distributed assets before paying legally obligated creditors.
As you can imagine, it can be difficult to know which creditors must be paid and which should fall on the back burner. Working with someone familiar with estate planning can help you and your loved ones to learn how to proceed with claims for debts and how your estate can be affected.
Source: Forbes, "How To Cope With Credit Card Bills After A Family Member Dies" accessed Jan. 23, 2015