Death and taxes; both are inevitable. In today’s society, dying with some debt may also be inevitable for most people.
So what happens to your debts when you die? Well … it depends.
If you and another person share the debt jointly, the debt lives on and the surviving joint debtor must make the payments. For example, if you and your spouse jointly apply for a credit card or a mortgage and then your spouse dies, you’re now solely responsible for making the payments.
But what if your spouse applied – in her name only – for a credit card, racked up $5000 in debt, and then died? The good news is that you have no legal obligation to pay her debt out of your own funds or funds you owned jointly with her. But if she died with any assets held only in her name (not held jointly with you), the debt may have to be paid from those assets.
Did you notice I said “may” have to be paid? That’s because Florida has very specific laws governing exactly who gets paid first when someone dies. Generally speaking, legal fees, reimbursement for the Personal Representative’s out-of-pocket expenses (funeral expenses, legal retainers, etc.), Medicaid, and recent medical bills take top priority, followed by other debts.
What happens if a person dies with more debts than assets? In that case, it may be necessary to pay the debts proportionately. For example: Jane dies with assets worth $100,000 in her individual name, but after a lengthy illness, dies with $200,000 in debts. Let’s say that the highest priority debts total $50,000. Those debts are paid in full and the remaining $50,000 is split proportionately between the remaining creditors. In other words, the probate judge would order that the remaining creditors receive only $1 for every $3 owed to them.
This is an over-simplification of what actually happens under Florida law and is presented to merely illustrate the general idea of how debts are treated in probate. If someone you loves dies, call an attorney who focuses on probate and trust administration. Florida has three different types of probate, and only an estate lawyer can help you decide whether probate is necessary.