What Happens to Medical Debt After Death?

When grieving deceased relatives, it’s normal for any medical expenses after death to be the furthest thing from your mind, but it is still something everyone should prepare for.

Studies have shown that 73% of people die in debt. 

This study will cause a family member to question,  “What happens to medical debt after death?”

After a death, understanding medical debt’s payment requirements will provide you with one less thing to worry about during your grief period. Knowing if you are responsible for covering any outstanding obligations that may remain after your loved one’s demise is crucial, no matter if the debt is small or large. 

In the case you are the one who passes away, your medical debts will remain, and creditors still expect to receive their money. 

You want the transition of your medical bills to be a smooth process for your family members, so knowing what to expect is essential.

Who is Responsible For Medical Debt After Someone Dies? 

In most cases, the deceased person’s debt is covered by their estate as long as it’s not insolvent. Lenders will seek out assets (real estate, bank accounts, etc.) and obtain the money they are owed. 

For example, If a person receives Medicaid, then at the time of their death, Medicaid has the right to recover all healthcare costs paid by the government from a person’s estate.

This federal law applies to recipients who have been permanently institutionalized and receiving Medicaid from 55 years of age until death (i.e., Nursing home). Depending on your state laws and a few other factors, you may need to prepare to take on some of your loved ones’ payments. 

Debt collectors can be very aggressive and intimidating when contacting you for repayment. Do not allow them to add more stress by demanding you to solve a problem that may not be yours. 

The person responsible for a deceased loved one’s medical debt can depend on:

  • Co-signing for the existing debt(i.e., Credit Card Debt or Personal Loans)
  • State laws that may enforce spouse or children to pay for specific debts
  • Joint bank accounts (Authorized users usually don’t count in this situation)
  • Being the Executor of your loved one’s estate
  • Living in a community property state 

A medical debt collector is entitled to assets to pay off the outstanding balance, resulting in the asset being reduced if not entirely liquidated. However, having specific ties to the deceased person, such as a co-signed mortgage, can make you responsible for those debts. 

After the probate process, if you are to receive an inheritance from your lost loved one, understand that their debtors are permitted to claim what is owed, and you’ll receive any remaining balance. 

Whose Debt Are You Responsible For? 

Worrying about the medical debts of a deceased loved one is not a main priority after their death.

Yet, debt collectors from hospitals, nursing homes, and even Medicaid will eventually begin reaching out to touch bases regarding how they will get paid for the deceased’s outstanding medical bills.

So what role do you play in handling these payments if you are a spouse, child, or next of kin?

Parents

According to CNN Money, 30 states require adult children to cover medical bills after a parents’ death under “filial responsibility” statutes. You must check the state’s laws that your parent(s) resided in to determine your role in the debt collecting process. 

If your parent resided and received medical care in a nursing home before their demise, don’t be surprised if the facility reaches out to you regarding outstanding balances. Some jurisdictions allow nursing facilities, long-term and acute care, to contact adult children to handle debts that the estate doesn’t cover. 

These laws differ from state to state, so be sure to do your due diligence to determine if you are liable for covering these medical debts. 

If you are the executor of your decedent’s estate, it is your responsibility to cover the remaining medical bills with their cash, valuables, or assets. 

It is wise to seek legal advice from a financial attorney regarding the laws and payment options to ensure you are paying what is needed while avoiding any unnecessary payments on your part. 

Doing this can relieve you of any overwhelming feeling you may have during this process. 

Spouse

As the surviving spouse, one’s responsibility for their deceased partners’ medical debt is similar to that of the child and parent.

Once again, depending on the state of residency, there is one unique legal distinction that determines a person’s ties to their spouse’s debt. Residing in a Community Property State determines whether or not you are undeniably responsible for medical bills after the death of a spouse. 

These states have laws declaring that all assets, valuables, or debts acquired DURING the marriage belong to both partners once you become married. 

Here are the current Community Property States:

• Arizona

• California

• Idaho

• Louisiana

• Nevada

• New Mexico

• Texas

• Washington

• Wisconsin

• Alaska (with a signed legal agreement between both partners)

Siblings or Other Relatives 

Under the circumstance, your loved one does not leave a will appointing an executor for their assets; you may become responsible for an existing debt if you are their next of kin. 

The court may appoint you or another family member as a personal representative to manage the estate. 

As long as you are not the co-signer of any of these assets, this will not affect your personal finances. However, you will be in charge of handling your relatives’ assets to cover their outstanding medical debts after notifying creditors of their passing.

Even though, under these circumstances, your finances are not in jeopardy from the debt, still do not be reluctant to seek professional assistance from a lawyer or an accountant. Ensure that you settle the debt correctly and there are no fraudulent claims on behalf of you or your loved one.  

What Steps Should You Take if Your Love One Dies Owing Debts? 

As we know, death can happen expectedly or at an untimely instant. Whichever the case may be, it is best to be financially prepared for such an unfortunate event. Take the necessary steps to avoid dealing with the headache of your deceased loved one’s debt collectors.

Step 1: If it concerns you, research your state’s laws to determine if you will be responsible for your loved one’s debt. Be sure to take note of specifics. Understand that the laws vary depending on your relationship to the deceased person, and medical debt will need to be paid accordingly. 

Step 2: Know the debt resolution plan your loved one may already have in place if any. It’s not unusual for a person to prepare for the inevitable to have a living trust. Make a mental note of what an “executor” is, so you’ll have a clear understanding of what your responsibilities are if named the legal representative of any financial obligations. 

Step 3: If your loved one’s death is expected, both of you should discuss estate planning and review the financial statements to assess liabilities, debt, and current assets. If your loved one is under no condition to make sound decisions for themselves, consider discussing your rights to assets and decisions with an attorney. 

Step 4: Reach out to the debtors to negotiate a resolution, whether that be payment plans or a one-time payment. Understand that once you reach out to the collectors to notify them of your loved one’s death, you have rights regarding how often they can contact you. The Fair Debt Collection Act will protect you from any harassment or unfair behavior. 

Though you are legally obligated to pay the debt, you can request that all collectors call you only between certain times or discuss financial details with your attorney. 

Final Thoughts On What Happens to Medical Debt After Death 

National Debt Relief states that hospitals are the leading cause of medical debts, prescription drugs are the second leading cause, and doctor bills are the third. 

As a result, medical debt ranks number 1 for bankruptcy filings compared to other types of debt. 

If your loved one passes away with outstanding debt, don’t panic. Learn what is required of you by checking out your state laws and act accordingly. 

Don’t hesitate to contact a financial professional if you are uncomfortable handling payments alone. They will assist you with any clarification needed regarding the medical debt collectors that are contacting you. 

After death, medical debt can be stressful to deal with on top of your grievance if you let it. Some people are not even aware that they are responsible for their deceased loved ones’ debt, so collectors, unfortunately, blindside them. 

Being prepared for any foreseen or unforeseen circumstance will allow children, siblings, and the spouse of a deceased individual to know their role in paying off any medical bills after death. 

Remember, your loved one’s estate will pay off the medical debt after death in most cases. The finances of a relative will rarely be affected. 

If you are an individual who wants to avoid leaving a massive amount of medical debt after death, there are ways to help you relieve or pay down your debt. Choosing to follow this route can provide peace of mind to family members in the future. 

1 thought on “What Happens to Medical Debt After Death?”

  1. When a loved one passes away, it’s saddening, to say the least. Once medical debt comes into the picture, it’s fair to say that it creates stress. With that said, I think this piece does a good job at helping to paint a more detailed picture.

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