Life is full of mysteries as we all know, and these mysteries vary from one to another.
One of the mysteries of life is not knowing when you will die.
Never in history has it been heard that anybody from any race or region lived forever
Although time spent on earth differs from person to person.
As man progress gradually, carrying out his daily activities,
there are situations which might lead him into borrowing money, product, or services from a firm, individual or a cooperate body with an agreement to pay back either monetarily or through a rendered service over a stipulated time.
This agreement might be contractual or just mere oral agreement, which is binding on both parties involved.
When a person who receives a product or service failed to return or payback at the stipulated time frame, it is termed as debt.
Hence, debt is an obligation or duty to pay money, deliver goods, or render service under an express agreement.
The person who owns is called a debtor, while the person who is owned is called a debtee or lender.
In a case where you own a certain amount of debt, without been able to refund or payback and died in the process, the big question here is:
What happens to debt when you die
As simple as this question may look, it is very tricky.
When someone is owing to a debt, the debt does not automatically go away.
Although under standard laws, no one is obligated to repay such debt, there are exceptions to this.
The spouse of the diseased and the diseased might be having a joint account and at the time on the application for a loan, and both rendered their signatures to payback at a stipulated date.
In a situation of death, the spouse of the diseased is mandated to pay back such debt.
In some regions of the world, such as West Africa, the deficit might be offset with the diseased fixed asset or estate.
Any debts you leave behind when you die can eat up assets that you had hoped to leave to heirs.
Am I responsible for my parents’ debt when they die ?
In some cases, family members could even be on the hook for your debt.
In this case, the legal representative of the diseased ensures the debts are fully paid before sharing the diseased assets. Your debts become the responsibility of your estate after you die.
Your estate is everything you owned at the time of your death.
The process of paying your bills and distributing what’s left is called probate.
The executor of your estate, the person responsible for dealing with your will and estate after your death, will use your assets to pay off your debts.
This could mean writing checks from a bank account or selling a property to get the money.
Under Federal Trade Commission rules, debt collectors can contact a deceased person’s spouse, parents if the dead was a minor child, guardian, executor, or administrator to discuss the debt.
But collectors can’t mislead family members into thinking they’re responsible for paying the debts if they’re not.
Most debts get passed on to any surviving family members after someone passes away.
If you do nothing to plan for this inevitability, the state in which you live will decide how your estate should be handled.
Creditors typically can’t go after your retirement accounts or life insurance benefits.
Those will go to the named beneficiaries and aren’t part of the probate process that settles your estate.
Because life insurance payouts are protected from creditors, you can use a policy to protect family members who would be responsible for your debts or simply to make sure you have money to pass on.
In addition, life insurance payouts are usually not taxable.
Being a debtor or running into debt is not something noble or of a reputation to be proud of, but things circumstances and things of life might make someone find himself in this situation.
It’s not something to be afraid of because it can happen to anyone, so there is a need for proper planning and strategy through various means into payback of owned debt.