In most cases, your debt doesn’t die when you do. You may not care about it because, after all, you’ll be dead at the time. But if someone you care about is on the hook for your debts, they might have a concern or two.
Are you concerned about your elderly parents and their finances? Here’s an interesting post on how to talk with them about money.
Keep in mind that under the law, all co-signors are responsible for debt. That means if someone signs on to your debt, they own it no matter what happens to you.. Creditors will come after their assets to collect on what you owe if they can’t collect from you or your estate. The question is, how do you protect your loved ones? In my experience there are three tactics you can use:
1. Get Out Of Debt Before You Die
Nobody enjoys being in debt and since nobody knows when their number is up, it only makes sense to try your best to steer clear of debt and get out of it as quickly as possible. I figure you already know this. Let’s move on.
2. Life Insurance
The more debt you have the more life insurance you need. (This is another reason why being debt-free saves you money.) If you have a solid financial plan, your debts should diminish overtime so don’t make the mistake of buying too much life insurance for a short-term problem. But depending on your situation, life insurance could be a partial solution.
3. Don’t Get Suckered
As I said, if someone you care about co-signs for you, they are a fair target for your creditors. But the inverse of this is also true. If nobody co-signed your debt, they aren’t going to be held responsible for your debt after you pass. Make sure your family is aware of this.
Some creditor creeps try to guilt-trip and/or lie to survivors and pressure them into paying debts of family members who have passed on. Make sure your family knows what they might have to be pay for and what they certainly will not have to pay for. Along the same lines, if you currently have a debt that you and your loved ones are listed on, try to convert that debt so that only you are responsible for it. This may be hard to do but it’s worth a try. Consider refinancing your debt if the current creditor won’t play ball.
Having said all this, don’t forget that your debts are part of your estate. That means the debts will have to be paid before any distributions can be made to your beneficiaries. But if the assets are not sufficient to pay off the debts, take the steps suggested above to protect your loved ones from debt they really have nothing to do with.
Are you concerned about leaving your family with debt after you die? What are you doing about it?