5 Things To Do With Your Family Member’s Bills After They Pass Away
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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When a loved one passes away, dealing with their finances can feel overwhelming and confusing. If you find yourself in the position to deal with their bills, you might not even know where to start.
Before you let the overwhelm sink you, remember there are some practical steps you can take to simplify the process. Kurt Bogseth, a financial advisor with Northwestern Mutual, laid it out.
Play the ‘Find It Game’
According to Bogseth, one of the first things you’ll need to do is what he calls “the find it game.”
“You collect all the mail that’s either been in the mailbox, on the kitchen table — that pile of stuff that everyone’s going to get to — and you start sorting it and going through it and finding the bills,” Bogseth said.
This includes common recurring bills like utilities, internet and phone service, as well as irregular ones like insurance premiums that may only be billed annually.
He recommended also looking through their checkbook and reviewing any checks they may have written regularly, especially for older people who may not have used online banking. “You start to go through and check off the normal and consistent things that people do.”
If you don’t have access to online banking or the deceased’s account credentials, it’s time to start making calls, he said.
“You could and should start to notify all these institutions … that the deceased is no longer with us and I am now stepping in to do this. What information do you need?” However, be aware that most institutions will require documentation such as a death certificate or legal proof that you’re acting on behalf of the estate.
Understand Your Liability
You may be wondering if you’re personally responsible for any of the deceased’s bills, as well.
“If you have a home and a mortgage together, if you have a car payment, it could be a spouse, it could be a parent and child relationship — anyone that is included on an account could end up being personally responsible for that debt,” Bogseth explained.
Even if you’re not personally liable, if you’re the executor of the estate, it will likely mean you are responsible for paying any outstanding bills or debts from estate funds or assets.
Unpaid debts can become legal issues down the line if left unpaid. “The outstanding institution can put a lien or a claim against the estate … when the estate sells assets, they have a right to have a claim against that estate,” he said.
Know Which Bills Continue and Which Don’t
Some bills end immediately after death, such as life insurance, disability insurance or payments, healthcare bills (such as Medicare or other insurance premiums) and long-term care insurance.
However, recurring services like electricity and water continue until the company is notified. “The heat, the electric, the water bill at the house … so those bills can continue to go on as well as property taxes and everything else until the asset is disposed of,” Bogseth said.
Bogseth described a client who continued paying bills on a family home for four years after the parents passed away, simply because no one wanted to deal with selling it.
Know Some Bills May Be Forgiven
While not all debts disappear, some may be discharged depending on the circumstances. “Typically, all federal subsidized student loans are forgiven upon death,” Bogseth said, though private loans may not be.
Credit card debt, on the other hand, can be tricky and often depends on the carrier. “[T]here are some states where any marital debt is debt of both people, even though the other person didn’t sign up for it.”
Don’t assume a debt isn’t your responsibility, he advised, always ask.
Avoid This Common Mistake
Bogseth warned that one of the biggest financial missteps he sees is “using the wrong dollars to pay the wrong bill.” For instance, liquidating a 401(k) or IRA to pay off bills can have significant tax implications.
“Life insurance is typically tax-free to the beneficiaries … whereas a 401(k) or IRA that’s never been taxed, somebody is going to be paying taxes on those dollars.”
Steps You Can Take Now
Planning ahead is the most important step you can take. For people who anticipate that there may be significant bills for family members to deal with after death, Bogseth emphasized the importance of establishing a durable power of attorney and gathering documentation while you are still able.
Bogseth went through this with his own father and was grateful to have already gathered all the necessary documentation when he had to step in and act on his father’s behalf.
People should also store documents securely and digitally. “We’ve actually had [everything] in the cloud, password-protected … I was able to email the power of attorney for healthcare to the doctors and they had it within five minutes.”
The biggest takeaway Bogseth offered is that “having a plan in place before you need the plan is so much better and easier on your family members and on your loved ones than trying to say, what could we and what should we have done after the fact.”
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