When a loved one has had a serious accident or long-term illness, their medical bills and, in many cases, credit card charges can add up quickly. When the individual has limited income, this may mean not being able to repay these debts. As their condition worsens, the medical and other bills usually increase and are often left behind when they pass away. However, who pays these medical and associated debts when the person who owes them dies?
Medical bills and credit cards are considered unsecured debts, or debts where the person did not have to give collateral to receive the goods or services. Paying unsecured medical debt is the sole responsibility of the person being treated. Consequently, if the person who owes money dies with these types of unpaid obligations, the surviving family cannot be asked to pay for them. If the individual had credit card debts, the only way another person would have to pay them as if they were named as a joint account holder. For instance, if a husband and wife shared a credit card account, and the husband died, the wife would still owe on the debt.
While a family may not have to pay their loved one’s debts, they can still be impacted by them. When a person dies, Michigan law gives creditors time to file claims against their estate. The estate’s personal representative is actually required to notify known creditors and publish a general notification to allow creditors time to file a claim against the estate. Any qualifying debts have to be paid by the decedent’s estate before the remainder can be distributed to the survivors. Medical debts take priority over some other kinds of obligations. If the liabilities exceed the value of the estate, the heirs will not receive an inheritance (although the heirs in many cases are entitled to certain financial allowances that take priority over other creditors).
Fortunately, there are ways to plan for your estate which can protect assets from creditors and keep them out of probate. Through certain legal devices such as a trust, you can keep valuable property out of the process and ensure that it is passed to your beneficiaries outside of probate. There are also ways of leaving your retirement accounts and life insurance proceeds directly to your loved ones.
Planning for your estate can help you ensure that your assets and loved one’s interests are protected in the event of your death. We have experience assisting clients in planning for the future and can help. Please contact us online or by phone if we may be of assistance.