During the estate planning process, Texans will try and resolve as many issues as possible. However, sometimes these problems fall through the cracks. While most individuals try to ensure they have no debts when they die—at least to the best of their ability—sometimes this is unavoidable. When this occurs, people may have questions about whether the debt is still owed and who pays the debt. Because this can be a very stressful situation, below are answers to some of the most common questions and how to handle each situation.
Does Your Debt Disappear After You Die in Texas?
Unfortunately, if a person passes away with debt, this debt is not automatically erased. Generally, your estate—through the person you name as executor of the estate—is required to pay off your debt. The process itself is called probate. Probate is accomplished through using the assets listed in the estate plan, such as cars, homes, bank accounts, and other assets, to settle the debt. In doing so, a judge will determine the estate’s total value, pay down the debt, and distribute the remaining estate assets to the heirs. The heirs will not be paid until the debt is handled.
Who is Responsible for the Decedent’s Credit Card Debt in Texas?
In many situations, relatives will not have to pay off a person’s credit card debt when they die. However, for Texans, this is not the case. Credit card debt must be paid off by a loved one if they: (1) co-signed for the credit card; (2) jointly owned property or a business; (3) they live in a community property state; or (4) they are required by state law to pay the debt, like medical bills.
Texas is a community property state, meaning the debt must be paid off by the loved one. The estate executor can still help manage this debt, so the relative does not need to pay it off themselves with their own savings. Instead, the executor can pay off the credit card debt as they would with other debts, like mortgages and car loans. Estate attorneys can also negotiate the payoff amount with the credit card companies and in some instances, wipe it out completely.
What Should I Do if I Have Debt Currently?
If you have debt while creating an estate plan, it is best to disclose this with the estate executor. Therefore, they will know about this and be more knowledgeable on what to expect during the probate process. Additionally, an estate planning attorney can help advise clients on ways to minimize debt and protect assets from probate.
Because probate can often be complicated, individuals who are drafting an estate plan while in debt should contact an experienced estate planning attorney as soon as possible.
Contact a Houston Estate Planning Attorney
If you or a loved one has questions about their estate plan, contact the knowledgeable attorneys at McCulloch & Miller, PLLC. We have also helped hundreds of Texans draft estate plans to fit their individual and specific needs. By drafting an estate plan, we can help to reduce the stress about you and your family’s future. To schedule a consultation and to speak with one of our attorneys, give us a call today at 713-333-8900.