#What happens to your medical debt after you die?

About 41% of Americans have debt that’s related to health care, according to a recent survey from health policy nonprofit KFF. If you don’t currently have medical debt, it’s possible that you’ll take some on in the future, even if you have private insurance, Medicare or Medicaid.

Generally, your family isn’t responsible for paying your medical bills after you’re gone. However, there are a few exceptions — especially when it comes to spouses and children, depending on where you live. It’s also common for immediate family members to continue receiving past due notices related to medical debt, even if they aren’t legally responsible for paying those bills. If that’s the case, it’s best to seek legal counsel before responding.

You might also want to get legal help to protect your estate. An estate lawyer can help you write a will, choose an executor and come up with other plans to protect your heirs’ assets from creditors.

What happens to your medical debt after you die?

Like all debt, medical debt left behind after your death is paid by your estate. The debt goes to the person handling your estate — called an executor.

The executor’s job is to manage the legal and financial affairs of a deceased person. Some people appoint an executor in their will, otherwise a probate court will appoint one based on your state’s laws.

The executor will use your assets to pay off your debts in a specific order, which varies depending on your state. If there isn’t enough cash in your bank accounts to cover your debts, then the executor may start selling your assets to cover the expense.

What if the estate doesn’t cover the debt?

If the estate is insolvent — meaning, you don’t have enough assets to cover your bills left after you die — it’s possible that the medical debt may be passed on to someone else under specific circumstances that include:

• A loved one cosigned a loan to help pay for care that insurance didn’t cover. In this case, the cosigner would be responsible for the repayments.

• You used a credit card with a joint account holder to pay for medical bills. In this case the joint account holder would be responsible for the balance.

• The executor of your estate didn’t properly follow your state’s laws around prioritizing creditor payments. In this case, the executor could be responsible for some of your debts.

• You’re a parent who lives in one of nearly 30 states with filial responsibility laws. In this case, your child may be responsible for some of your unpaid medical bills.

• You’re married and live in a state with community property laws. In this case, your spouse may be responsible for some or all of your medical debt.

🔍 If a medical facility claims you’re a guarantor and asks you to pay outstanding fees left behind after a loved one has died, contact a lawyer or elder law attorney. It’s illegal for nursing homes to request third-party guarantors or “responsible parties” in their admission agreements, thanks to the federal Nursing Home Reform Act.

If you live in a state with community property laws, your spouse could be responsible for any unpaid medical debts after you die. In states with community property laws, the assets that you earn and debts that you take while you’re married are shared between both partners — a holdover from a time when single-income households were the norm. Most states have done away with community property laws.

Currently, there are nine states that still have community property laws:

• Arizona

• California

• Idaho

• Louisiana

• Nevada

• New Mexico

• Texas

• Washington

• Wisconsin

In California, Nevada and Washington, registered domestic partners are also covered by community property rules.

Living in a community property state doesn’t mean that creditors can necessarily clean out your and your spouse’s bank accounts. That’s because some types of assets and debt are considered to be separate property — owned by only one spouse.

Generally, the following types of assets are considered separate property:

• Assets or debts you took on before your marriage, such as contributions to a retirement plan or student loans

• Assets and debts you took on while living outside of a property state, regardless of when you were married

• Assets you bought during marriage using separate property funds — such as a car purchased with money you earned before you married

• Gifts given to an individual spouse, since this is an unearned asset

• Inheritance, since this is also an unearned asset

• Any property listed as separate in a prenuptial agreement

What is and isn’t community property can become complicated, so consult a probate lawyer if you ever lived in a community property state during your marriage and are worried about your spouse taking on unpaid medical debt.

If you are a widow or widower who’s received a call from collectors claiming you owe them for your spouse’s medical or other debt, don’t pay or sign anything until you have confirmation from a lawyer that you are, in fact, responsible.

How filial responsibility laws may affect your children

In states with filial responsibility laws, adult children are financially obligated to pay their deceased parents’ debt. This may apply even if that parent did not financially provide for or support the child.

Some 30 states have filial responsibility laws that allow creditors to turn to adult children to satisfy their parents’ medical debt. If you’re the child of a parent who’s recently died, it’s worth checking to see if your parent was a resident of a state with these laws and what it entails, since each state’s laws are slightly different.

Fortunately, most states don’t enforce their filial responsibility laws, even if they technically have them on the books. Some states, like California, even have laws that contradict their filial responsibility laws: California’s Welfare and Institutions Code, for example, states that no one is liable to pay for a relative’s medical care.

However, some medical facilities have sued the adult children of their deceased residents who were too wealthy to qualify for Medicaid but couldn’t afford medical costs. Pennsylvania has enforced the filial responsibility law more than any other state over the past few decades, requiring children to pay for the long-term care of indigent parents. Other states that have seen similar lawsuits include Louisiana and North Dakota.

States with filial responsibility laws

When your parent lives in a filial responsibility state — but you don’t

It’s possible to be sued and found liable for your parents’ medical debt even if you don’t live in a filial responsibility state. This happened in 2012, when a Pennsylvania court found the son of a former nursing home resident liable for her unpaid debt — even though he lived outside of the U.S.

If your parents died in a state other than the one you live in, it may not matter if you’re held liable. Generally, a state can’t enforce a ruling if you live outside of its jurisdiction. However, you should still consult a lawyer if you’re being sued for a deceased parent’s outstanding medical debt.

How to manage medical debt after a loved one dies

If debt collectors contact you about a loved one’s unpaid medical bills after they die, contact a lawyer familiar with consumer protections before you respond. There is a good chance you aren’t responsible for them, even if the creditors say you are.

You can find a lawyer who specializes in elder care on the American Bar Association’s website. In some cases, you may be able to qualify for free representation.

If it’s a debt that you shared — say you took out a joint home equity loan or HELOC to cover medical expenses — then you will have to assume the repayments as usual. However, you may be able to renegotiate the amount, rate and term due to the circumstances. Call your creditor and explain the situation if the monthly payment isn’t something you can afford.

Dive deeper: What not to do after losing your spouse or partner

What happens to other types of debt after you die?

In most cases, other types of debt are treated similarly to medical debt after you die. However, there may be some differences, depending on the type of debt you have.

• Mortgages can get complicated because they’re tied to an asset. Cosigners or heirs often assume the responsibility for the mortgage. Spouses may also be responsible for the mortgage in community property states. If nobody claims the home, then the lender can foreclose on the property.

• Credit card debt typically gets passed on to any joint account holders or cosigners after you die. Your spouse may also be responsible for paying off the account if you live in a community property state. Authorized users won’t be responsible for the debt.

• Federal student loans can be discharged when you die, though it won’t happen automatically. A family member will need to submit proof of debt to the servicer. Private student loans are treated like personal loans and are not discharged.

• Personal loans are typically paid off by the estate. If any debt remains, then a cosigner or spouse may assume responsibility if the debt was taken on in a community property state.

Dig deeper: What happens to your bank account after you die?

How to avoid passing on debt after you die

Estate planning can help you reduce the amount of medical debt you pass on when you die — and, in some cases, eliminate it.

The first step to protect your assets is to work with an estate planning attorney to create a will. This will help you make sure that you’re following local laws and also designate a professional — such as a probate lawyer — as the executor of the will.

You may also want to consider steps that can help your relatives directly receive money after you die, like buying a life insurance policy. Life insurance money goes directly to the beneficiaries when you die, rather than to the estate, and isn’t subject to community property laws.

Also consider giving away your assets before you die. Since gifts may have limits, you may want to talk to a trusted financial or retirement advisor to help you draw up a plan.

Sources

About the writer

Anna Serio-Ali is a trusted lending expert who specializes in consumer and business financing. A former certified commercial loan officer, Anna’s written and edited more than a thousand articles to help Americans strengthen their financial literacy. Her expertise and analysis on personal, student, business and car loans has been featured in Business Insider, CNBC, Nasdaq and ValueWalk, among other publications, and she earned an Expert Contributor in Finance badge from review site Best Company in 2020.

Article edited by Kelly Suzan Waggoner