When a loved one passes away, handling their financial affairs can feel overwhelming, especially when it comes to unpaid debts. You might wonder, Will a person inherit a loved one’s debts, and how this could impact you or your family. In Georgia, inheriting debt isn’t as straightforward as it may seem. Let’s clarify what actually happens to a loved one’s debts, what the law says, and when, if ever, family members might be responsible.
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What Happens to Debts When Someone Passes Away?
When a person dies, their “estate” (all their assets, including property, savings, and other valuables) is used to settle any unpaid debts. An executor—someone the deceased trusted to manage their estate—steps in to pay off debts with the available assets. Only after debts are settled does any remaining inheritance get distributed to family members.
Essentially, the estate, not family members, shoulders these financial obligations. Whether it’s credit cards, medical bills, a mortgage, or personal loans, the estate covers as much as it can. If there aren’t enough assets to pay everything, creditors often don’t receive the full amount they’re owed.
Are Family Members Responsible for the Debts?
Typically, family members aren’t personally responsible for a loved one’s debts. However, there are a few exceptions. If you co-signed a loan or shared a credit account with the deceased, you could be liable for the remaining balance. But if the debt was solely in your loved one’s name, Georgia law generally does not pass that debt onto spouses, children, or relatives.
For example, if your spouse had an individual credit card debt, you wouldn’t be responsible for it. Georgia law doesn’t automatically make family members liable for a loved one’s individual debts.
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How Are Mortgages and Car Loans Handled?
Mortgages and car loans work a bit differently. These are known as “secured debts” because they’re tied to specific assets (like a home or car). If payments stop, lenders have the right to repossess the asset. In some cases, the executor might decide to sell these assets to cover the debt, or the person inheriting the property may continue making payments if they want to keep it.
The estate only pays unsecured debts, like credit cards, if there’s enough money available. If not, those creditors may go unpaid.
Special Cases: Taxes, Student Loans, and More
Certain types of debt follow different rules. For example, you must still cover any unpaid federal taxes, but federal student loans are generally forgiven if the borrower passes away. This means the estate or family members won’t have to worry about paying them off.
What If the Estate Can’t Cover All Debts?
If the estate’s debts outweigh its assets, this is called an “insolvent estate.” In that situation, the executor must prioritize which debts get paid, following a specific order starting with secured debts (like mortgages), then taxes, and finally, other costs like funeral expenses. Any remaining unsecured debts, like credit cards, may go unpaid if there isn’t enough left in the estate.
If you’re facing questions about Will a Person Inherit a Loved One’s Debts or need help managing the probate process, call us today. We’re here to help make this time easier for you and your family.
