Talking about what happens to your belongings after you die is a difficult topic for most people to discuss with anyone, especially close family members. Studies show that only four out of every 10 adults in the U.S. have an estate plan in place.

Many people are also reluctant to discuss what happens to their debt when they are no longer here. However, knowing who will be responsible for paying your outstanding bills is every bit as important as putting a will or trust in place to distribute your assets.

Steps to handling debt after someone dies

After death, the executor of the estate begins the process of reviewing assets, debts and unpaid bills. The process includes:

  • The executor reviewing the deceased person’s credit report to see outstanding debt
  • He or she contacts the Social Security Administration and any creditors or lenders, and issues a death certificate in the person’s name
  • All debt is then passed on to the estate and the executor prioritizes those to be paid
  • Illinois groups debt into certain classes and once one set is paid off, the executor will move on to the next group
  • Medical debt is in the last group to be paid by an estate, coming after funeral expenses, back taxes, wages or other funds due to employees and awards to their spouse and children

Some assets are not included

In most cases, certain assets are considered outside the estate, including life insurance policies, retirement, brokerage and annuity accounts and cannot be used to pay off debts. However, all these accounts need to have valid designated beneficiaries.

Can children or spouses be forced to pay?

In Illinois, spouses or children generally do not inherit their loved one’s debt unless they co-signed for a loan or are joint account owners on bank or credit card accounts. Once all funds in the estate are depleted, outstanding debt usually goes unpaid. An exception exists under the Illinois Family Expense Act for so-called “family” expenses. These are debts accrued during the course of the marriage that are related to the general welfare of the family. However, judges have interpreted this law in many different ways.

Be proactive with comprehensive estate planning

Having an estate plan in place is the best way to avoid confusion and legal concerns that can arise during the probate process. An experienced estate planning attorney here in Illinois can answer your questions to find the best plan, so your possessions are distributed according to your wishes.