Americans Dying in Debt

It used to be that Americans tried to be debt free in retirement and not leave their estate or heirs with the need to pay off debt. That apparently is less the case now. A new study concluded that on average Americans die with $62,000 of debts. Since that’s an average, many people die with more debt and some with much more. And some still die with little or no debt. The bulk of the debt was credit card balances, while mortgages were next.

“Debt belongs to the deceased person or that person’s estate,” said Darra L. Rayndon, an estate planning attorney with Clark Hill in Scottsdale, Arizona. If someone has enough assets to cover their debts, the creditors get paid, and beneficiaries receive whatever remains. But if there aren’t enough assets to satisfy debts, creditors lose out (they may get some, but not all, of what they’re owed). Family members do not then become responsible for the debt, as some people worry they might.

That’s the general idea, but things are not always that straightforward. The type of debt you have, where you live and the value of your estate significantly affects the complexity of the situation. (For example, federal student loan debt Opens a New Window. is eligible for cancellation upon a borrower’s death, but private student loan companies tend not to offer the same benefit. They can go after the borrower’s estate for payment.)

There are lots of ways things can get messy.