The next of kin?
Their estate.
Depends on what kind of debt it is. Home Loan? Credit Card?
You would have to consult an attorny in you district to get an precise answer.
Generally the deceased estate would be the first to recieve a judgment unless the debt was incurred by family members/co-sighners. Even then the mater could be held up in probate.
Best to consult a lawyer before they die, you might be able to shelter some of the debt to your advantage.
As others have said, your estate. That is, the assets you had before you died. If there are not enough assets to cover the debt, the debtor misses out. The estate is bankrupt.
Of course, if the deceased was not the only person liable for the debt, (eg a husband and wife sign up for a loan and only one of them dies) then the one remaining alive still owes the money. But that is not really the question.
Depends on the country and jurisdiction. In common law jurisdictions the estate is liable for the debts which would be satisfied before any distribution of assets to the heirs. In some countries debts of the deceased are apportioned among the heirs who inherit them together with the assets. The heirs are free to accept their full share of the inheritance, including debts, or to reject it.
Sailor, in the latter type of country, what difference does it make as opposed to common law countries? If the debt you are going to take on is more than the inheritance you are never going to take it on. If it is less, then what you get is the net inheritance after deducting the debt, which is essentially the same as the estate being liable isn’t it?
Or is the only difference mechanical and administrative, in the sense that there is no real difference in outcome (as above) but that administratively the heir takes on the debt and then settles up, rather than the estate doing so?
Sailor, in the latter type of country, what difference does it make as opposed to common law countries? If the debt you are going to take on is more than the inheritance you are never going to take it on. If it is less, then what you get is the net inheritance after deducting the debt, which is essentially the same as the estate being liable isn’t it?
Or is the only difference mechanical and administrative, in the sense that there is no real difference in outcome (as above) but that administratively the heir takes on the debt and then settles up, rather than the estate doing so?
Princhester, there is a huge difference. Suppose the following scenario: A dies and his estate consists solely of a plot of land and a personal, unsecured debt of 100K. He has two sons, B and C who, according to the will, get 60% and 40% of the estate respectively. In the US the administrator of the estate would sell the land and use the proceeds to pay de debt first and if there is anything left over then the heirs get their share. Creditors are paid first, before the heirs, and debts are secured by the estate.
In another country sons B and C would inherit 60% and 40% of the land pro-indiviso and they would inherit 60% and 40% of the debt. The first question the heirs need to answer before accepting is whether the net inheritance is positive or negative and that can be quite subjective depending on the valuation of the assets so it can happen that the net value is not so clear. Suppose they both accept their inheritance. The creditor now is owed money by two people who may have very different rating and conditions than the original applicant. They own the land but the creditor would have to go to court to get a lien on the land which may not be possible. The sons could legally sell the land and not use the money to pay the debt. They just assumed a personal debt which they can delay or maybe not pay. Heirs are paid first and creditors just get a right for the debt against the heirs. Debts are not secured by the decedent’s estate but they are just passed on to the heirs. Huge difference.
Yeah I can see that.
Interesting.
Additionally, not all creditors receive the same level of payment from an estate. Oftentimes, only proportional payments are made from the proceeds.
Hmmm… is life insurance made payable to a beneficiary “part of the estate”? And is there a difference whether I buy my policy with my wife as beneficiary, or she buys a policy on me with herself as beneficiary?
Granted there’s the possibility of state-to-state differences, but surely there’s a general rule-of-thumb.
Then what about all of those stupid “credit life insurance” policies you get offered from shady car dealers and high-interest credit cards? If it’s “insurance” and “part of the estate” and everything is broken proportionally, couldn’t other creditors demand part of that insurance?
If the beneficiary is the wife, then the wife is the beneficiary. If the estate is named as the beneficiary, then the estate is paid. either can be the beneficiary AFAIK.
Or, if you took out the “loan insurance,” then there’s nothing to worry about: the insurance paid off the loan.
So I guess by your answers (generally speaking of course) that it would be silly to leave life insurance to your estate if you have no net worth! Leave it to your wife or significant other, and whatever else is left from the estate goes to pay creditors. Of course, if your SO wants to keep those things, he or she will have to pay.
I guess that basis for my question really was, if you have no net worth, and you die, and your wife gets the insurance, then she’s not responsible for paying the debts with the insurance money, because it’s not part of the estate – it’s hers.
Yes, in general terms it is better to make the spouse the beneficiary for several reasons. Also, to avoid probate.
So, what about the case where spouses each have their own credit cards and other accounts? That is, each account only lists one person and has no specific contract with the other? If one spouse dies with more debt than assets to their name, do assets in the name of the other spouse get taken? How does either spouse protect themself from financial impropriety of the other (beyond keeping accounts separate)? Or does keeping accounts separate provide protection? In Maryland, say…