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What Happens to Your Debt When You Die? A Guide to Debt and Estate Planning

Dealing with debt is a common concern for many individuals, and understanding what happens to your debt when you pass away is crucial for estate planning. At Heritage Law Office, our experienced estate planning attorneys will guide you through this complex process and help you create a comprehensive plan that addresses your unique needs. Contact us either online or at 414-253-8500 to schedule a free consultation today.

The Basics: Debt and Death

When a person passes away, their debts don't simply vanish. Instead, they become a part of the deceased's estate, which is the legal entity that represents the person's assets and liabilities.

Types of Debt

There are several types of debt that may be present in an estate, including:

  • Credit card debt
  • Mortgage debt
  • Personal loans
  • Student loans
  • Medical bills
  • Taxes

How Debts are Handled After Death

The process of handling debts after a person's death can be complex and may vary depending on the specific circumstances.

The Role of the Executor

When a person dies, their estate is usually administered by an executor, who is responsible for managing the assets and liabilities of the deceased, including the payment of debts. The executor will use the assets of the estate to pay off the debts in the following order:

  1. Funeral and burial expenses
  2. Administrative expenses (including attorney's fees and court costs)
  3. Taxes
  4. Secured debts (such as mortgages)
  5. Unsecured debts (such as credit card debt)

Insolvent Estates

In some cases, the deceased's estate may not have enough assets to cover all outstanding debts. This is known as an insolvent estate. In this situation, the executor will pay off the debts according to the priority order mentioned above, until the assets are exhausted. Remaining debts will typically be discharged, and the creditors will have to write off the losses.

Protecting Your Loved Ones from Debt

Estate planning is essential to ensure that your loved ones are not burdened by your debts after your death. Here are some steps to consider:

Life Insurance

Life insurance policies can provide financial security for your family and help cover outstanding debts. Make sure to review your policy periodically to ensure that it meets your current needs.

Joint Debts and Co-Signers

If you have joint debts or someone has co-signed a loan for you, they may be responsible for the debt after your death. Consider discussing your debt situation with your co-signers and explore options to protect them from financial hardship.


Establishing a trust can be a useful estate planning tool to protect your assets and ensure that your loved ones are taken care of after your death. Trusts can be tailored to your specific needs, and can help shield your assets from creditors.

The Importance of an Estate Plan

A well-crafted estate plan can help minimize the impact of your debts on your loved ones and ensure that your assets are distributed according to your wishes. An experienced estate planning attorney can help you navigate the complexities of estate planning and create a plan that addresses your unique situation.

Estate Planning for Business Owners

If you are a business owner, your business assets and liabilities can also impact your estate planning. Here are some essential considerations for business owners when planning their estate:

Succession Planning

Planning for the future of your business is crucial to ensure its continued success after your death. A well-thought-out succession plan can help minimize disruption and protect the value of your business.

Business Debts

Just like personal debts, business debts will also become a part of your estate upon your death. It's essential to understand the structure of your business, as it will determine the extent to which your personal assets are at risk. For example, if your business is a sole proprietorship, your personal assets may be used to pay off business debts. On the other hand, if your business is a limited liability company (LLC) or a corporation, your personal assets are generally protected from business creditors.

Remote, Phone, and Online Appointments

At Heritage Law Office, we understand that accessibility is important for our clients. That's why we offer remote, phone, and online appointments, ensuring that you can receive our services wherever you are.

Contact an Estate Planning Attorney at Heritage Law Office

If you have concerns about debt and estate planning, contact our knowledgeable attorneys at Heritage Law Office. We will provide you with a thorough review of your needs and help you create a comprehensive estate plan tailored to your unique circumstances. Reach out to us using our online form or call us directly at 414-253-8500 to schedule a free consultation today.

Contact Us Today

For a comprehensive plan that will meet your needs or the needs of a loved one, contact us today. Located in Downtown Milwaukee, we proudly provide legal advice to those in Milwaukee County and surrounding communities.

Milwaukee Office
757 N. Broadway, Suite 300
Milwaukee, WI 53202
Minneapolis Office
Minneapolis, MN 55104
414-676-2787 (fax)
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