Money usually isn't the first thing on your mind when you lose a family member to death. Unfortunately, you may have some financial responsibilities that can't wait long for resolution. Certain bills may not be your responsibility at all – but your loved one's creditors might want you to believe that they are. Mistakes can cost you unnecessary money, so consult with an attorney as soon as possible to find out exactly what your rights and responsibilities are.
Social Security Benefits
If your family member was collecting benefits, you must notify the Social Security Administration of his death as soon as possible. Social Security benefits payable to a decedent terminate upon his death. If your loved one received his benefits by direct deposit, you must isolate any payments received after his death and ask the bank or financial institution to return them. If your loved one received checks, you can send them back to the SSA uncashed. Some funeral directors will take care of notifying the SSA for you, but you're responsible for returning any SSA money received after the death. These payments cannot be made part of his estate.
Your loved one's estate will eventually become responsible for his bills. The executor – either named in his will or appointed by the court to oversee his estate if he died without one – pays these bills from assets he left. Until probate opens, however, someone may have to keep some necessary expenses current. This is particularly true if the decedent let some bills lapse. Secured loan payments such as mortgages and auto accounts must be kept current or the estate risks losing the assets to foreclosure or repossession. Utilities and property insurance for real estate must also be maintained. If you pay any of these things on behalf of the decedent, you can usually present a claim for repayment to his estate. If the decedent left more debts than assets, however, you may not be repaid.
Family members are almost never responsible for paying their loved one's unsecured debts. These are the responsibility of the decedent's estate, and if the estate doesn't have sufficient funds to pay them, they don't get paid. Creditors must make a claim against the estate as part of the probate process for money owed to them. The executor is obligated to liquidate assets if necessary to make payment. This can whittle away at the estate so there's nothing left for beneficiaries, but the beneficiaries don't have to pay out of their own pockets to satisfy these debts. Exceptions to this rule exist if you cosigned on an account with your loved one, or if you're the decedent's spouse and you live in a community property state. These jurisdictions view all debts incurred during a marriage as owed by both spouses.
It's not uncommon for debt collectors to descend upon family members after a loved one's death, implying that they're responsible for paying certain bills even if they're not. If this occurs, you have two options. You can give the creditor the name and contact information of the estate's executor, or you can take the creditor's information and hand it over to the executor. After you've done so, the creditor typically has no right to continue asking you to satisfy your loved one's debt. If the creditor continues to ask, you can contact your state's attorney general to report the action. You can also report the creditor or collector to the Federal Trade Commission.
- Sharon D. Ravenscroft: After Death, Legal and Financial Responsibilities – Part One
- Unique Estate Law: Do Heirs Have to Pay Off Their Loved One's Debts?
- Federal Trade Commission: Paying the Debts of a Deceased Relative – Who Is Responsible?
- Social Security Administration: How Social Security Can Help You When a Loved One Dies
Beverly Bird has been writing professionally for over 30 years. She is also a paralegal, specializing in areas of personal finance, bankruptcy and estate law. She writes as the tax expert for The Balance.