Dealing with the death of a spouse or a loved one is difficult without the additional worry of financial matters. Many spouses struggle with how to deal with the remaining debt after the debt of a spouse. Losing one income, and deciding the best way to care for your family, are all factors in deciding what to do after your spouse dies.
Assets Stand for Debt
After someone dies the estate he leaves behind must stand for his debts. This means that any assets he has including the house, investments and money in the bank must be used to pay off outstanding debts. After all the assets have been liquidated and applied toward debt, any remaining debt will be forgiven. If you are a co-owner on the house you will be forced to sell the house or refinance to give the estate his half of the assets to cover his debts.
Death of Spouse
The death of a spouse does put your home at risk. You need to determine if you can take on the debt by yourself if you want to keep your home. You can use life insurance money to pay off the mortgage or any outstanding creditors. State laws vary in regard to credit card debt and marriage, and you might be responsible for all of the credit card debt whether or not it was in your name. Selling the house and clearing the debts may be the best option for you, if you cannot afford to make the payments on just your salary.
Death of Parents
After the death of a parent it is common for the estate to sell the house to stand for the estate. This will take care of any outstanding debt your parents may have. After the debt has been settled the remainder of the estate can be divided among the heirs or children. The executor will make the final decision regarding whether selling the house is necessary.
Settling the Estate
The executor of the estate will need to send a copy of the death certificate to all creditors along with a letter explaining that the executor will be in touch after he has settled the estate. The executor will sell the assets and divide the proceeds among creditors. If there is not enough money left to cover the outstanding debts, the executor should write to creditors explaining there are not enough assets to cover the debt and any remaining debt will be forgiven. If there are assets left after the estate is settled, they will be divided among the children and the heirs.
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