Who Is Responsible for Someone’s Medical Debt When They Die?

When a loved one passes away, their medical bills don’t simply disappear. However, this doesn’t mean that their survivors are automatically responsible for paying these debts. Medical debt, like all other debts, is typically paid by the deceased’s estate.

The estate is the total of all the assets owned by the deceased at the time of their death. If the estate has enough assets to cover the debts, the executor (or administrator if there is no will) will use these assets to pay off the debts before distributing any remaining assets to the heirs.

If the estate is insolvent, meaning it has more debt than assets, the court will prioritize payments to creditors according to federal and state laws. In most cases, if the estate cannot cover the medical debt, the creditors will write it off. However, there are exceptions, such as cosigned medical bills, filial responsibility laws, Medicaid estate recovery, and community property states.

What Happens to Other Forms of Debt When Someone Dies?

In addition to medical debt, there are often other debts that need to be addressed when someone dies. These can include nursing home debt, mortgage or home equity debt, cosigned personal loans, and credit card debt.

For example, if a family member cosigned a personal loan or a mortgage, they would be responsible for paying off these debts after the deceased’s death. Joint credit card accounts will also remain the responsibility of the surviving account holder.

How Do You Notify Creditors of a Death?

Once the extent of the deceased’s debts has been established, the executor or surviving family members need to notify creditors of the death. Creditors usually stop trying to collect unpaid bills until the estate has been sorted out.

Creditors may inform the major credit bureaus of the death, and the Social Security Administration also periodically notifies credit bureaus. The executor or survivors can also contact the credit bureaus directly to report the death, providing a copy of the death certificate and legal documents indicating their authority to act on behalf of the deceased.

Can the Death of a Relative With Medical Debt Affect Your Credit?

In most cases, the death of a relative with medical debt will not affect your credit, as you are not personally responsible for the debt. However, if you cosigned on medical debt, live in a community property state, or live in a state with filial responsibility laws, you could be personally liable for the debt if the estate is insolvent.

Medical debt is treated differently from most other types of debt. It won’t show up on your credit report unless the medical provider sells the debt to a third-party collection agency. If this happens, there is a 365-day grace period before the medical collection account can appear on your credit report. Taking action within this window is crucial to maintaining a healthy credit score.

Protect Your Estate and Your Heirs From Medical Debt

Dealing with unpaid medical debt can add to the stress of sorting out an estate after a family member’s death. Estate planning can help ensure that your heirs don’t have to worry about your medical bills after you’re gone.

Proper estate planning can protect your assets from creditors, ensuring they can’t be used to pay your debts after you die. For example, life insurance policies, retirement accounts, brokerage accounts, and living trusts can be protected from creditors with the right planning.

Laws regarding estate planning are complex and vary from state to state. An experienced estate planning attorney can help structure your assets in a way that provides peace of mind for you and your family.

Contact O1ne Mortgage for Your Mortgage Service Needs

At O1ne Mortgage, we understand that dealing with financial matters after the loss of a loved one can be overwhelming. Our team of experts is here to help you navigate through these challenging times. Whether you need assistance with mortgage services or have questions about managing debt, we are here to support you.

Call us today at 213-732-3074 for any mortgage service needs. Let O1ne Mortgage be your trusted partner in securing your financial future.