What if the Legacy Your Loved One Leaves Behind is Debt?

By Elsie Dudukovich0 Comments

Changes in our culture have made it more acceptable to publicly talk about things prior generations would have never considered. You might know all the details of someone’s romantic getaway weekend or get a blow by blow replay of their messy divorce proceedings. Yet, there are still some things that are almost taboo to discuss with almost anyone – even our family. 
  • How much credit card debt do you have?
  • Do you have enough, if any, money saved for retirement?
  • How much is left on your mortgage?
  • What does your take-home pay look like?
  • What financial resources do you have in the event of an emergency?
There is still another set of almost taboo questions requiring serious, thoughtful answers: how to handle end of life matters. While some may have discussed ideas about funerals and the arrangements, there is still the matter of the financial fallout for the survivors. At such an emotional time, raising these questions – never mind seeking the answers – has been known to cause lasting and painful family rifts.
  • What financial resources are available for end of life care?
  • What happens if someone dies and still has a mortgage on their house?
  • Who is responsible to pay the credit card or other consumer debt left behind?
  • Who is responsible for paying any medical debts?
For a variety of reasons, if people had more debt during their working years they are likely carrying that debt into retirement. In 2010, senior citizens held an average of $50,000 in debt, with most of that coming from a mortgage or other housing-related debt. According to Bill Emmons, an economist with the St. Louis Federal Reserve, that debt is likely due to homeowners borrowing against their houses through home equity loans, refinancing and taking cash, and also extending mortgage terms. 

When it comes to unsecured debt, 2.2 million people aged 60 and over have been the co-signer or co-borrower on student loans for their children or grandchildren and this does not even account for the number of senior citizens using credit cards to help meet their own expenses.

With sobering information such as this, the question of inheriting debt becomes something on people’s minds but not being spoken about and discussed. Jeanne Sahadi, contributor for CNNMoney, tackles this very concern in her article “Can you inherit your dead parent’s debts?” While this is a sensitive subject for many people, Sahadi’s article can be seen as a good starting point for anyone looking for what questions to ask or seeking answers to situations faced for the first time. 

The answers to these questions are an important part of planning to take care of one’s own personal expenses over the course of their lifetime. Most of us want more than just comfortable golden years; we want to leave a legacy to our surviving loved ones that is more than just monthly payments.