When approaching estate planning in North Carolina, many people ask what happens to debt when they pass away. The short answer to this question is “it depends.” Your debt might pass on to your loved ones, creditors might come after your estate, or creditors could be out of luck. Let’s review the different scenarios.

The inheritance of debt in North Carolina

Your loved ones may inherit your debt when you die, but only under certain circumstances. For example, someone else might inherit your debt when you die if they are:

  • A co-signer on a loan. If someone entered into a loan with you, they will likely inherit that debt when you die.
  • A joint owner. If someone is a joint owner on an account with you, this account will become theirs when you die.
  • An executor of an estate. If the executor of your estate does not follow the court rules and state laws for paying off debt, they might be held responsible for your debt.

Something to bear in mind, however, is that it takes special circumstances like these to inherit debt.

How can creditors collect on your debt after your death?

Generally, creditors cannot collect on your debt through your retirement accounts, assets held in a revocable trust, or any life insurance proceeds. However, they can get to other forms of money in your estate, including your assets and real estate, which is why it is critical to keep your debt low while you are alive. Your estate and loved ones are not responsible for paying off your loans.

How can you plan for debt after death?

It might surprise you to know that you can plan for any debt you own upon your death. By placing your assets in a trust or properly appointing an executor for your estate, you can save your loved ones unnecessary stress and heartache in the future.

Even if you anticipate being in debt at the time of your death, working with a qualified estate planning attorney can help you prepare. A lawyer can help you to:

  • Understand how much debt you are in and project how much debt will remain after your death
  • Get a better picture of the current value of your estate
  • Place your assets or funds in a trust or other legal document to help protect them against creditors after your death
  • Appoint agents or executors to help manage your estate and debt after your death
  • Find peace of mind in knowing what will happen to your debt after you die


Work with an experienced estate planning attorney in North Carolina

At Salines-Mondello Law Firm, PC, our lawyers are very familiar with the best estate planning solutions for your needs and situation. Contact us today to book your appointment for a private consultation.