What Happens to Your Bills When You Die? 4 Ways To Prepare

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Benjamin Franklin said nothing is certain except death and taxes — but if Franklin lived in 2025 America, he might have said death and debt instead.

But what happens when the former relieves you of the latter? Do your bills die with you, or do the ghosts of APRs past haunt your posterity?

Heirs Don’t Inherit Debt, but Debt Can Rob Heirs of Their Inheritance

According to New York Life, creditors can usually go after the deceased’s assets to cover most outstanding debts. Whatever is left over, if anything, is distributed to the deceased’s heirs.

If there are no assets in the estate, or not enough to repay everything, most remaining debt will be forgiven — but not always, and the rules vary from state to state.

Who Gets What Is Decided in Probate

Those with wills leave the responsibility of outstanding bills to the will’s executor, who is obligated to pay the deceased person’s debts from the estate before distributing the remaining assets to heirs. That includes any loans the deceased co-signed.

A series of legal proceedings called probate determines which creditors get how much and in what order of priority.

Common Outcomes for Common Debts

Here’s a look at how most common debts are handled after death.

Tax Debt

Ben Franklin likely wouldn’t be shocked to learn that even in death, the IRS comes first. The executor must file the deceased’s final tax return and pay any outstanding tax debt — or as much as their assets can cover.

When creditors enter probate to claim their share, the IRS is almost always at the top of the pecking order.

Medical Debt

In most states, medical bills take priority over other debts, and some states saddle surviving spouses with some of those bills. In most cases, however, any hospital bills the deceased’s assets can’t cover are forgiven.

Home Loans

• If a spouse or other co-owner is on the mortgage, the co-owner assumes the debt.
• If a single beneficiary inherits a property, that heir becomes the owner and assumes responsibility for the mortgage.
• If multiple heirs inherit a property, the probate court often orders the home to be sold and distributes the profits among them.

Credit Card Debt

Credit card companies can file claims against the estate but cannot pursue family members or heirs. They sometimes just write the debt off to avoid spending the resources needed to navigate probate.

Secured Debt

With secured debt like auto loans, the lender can repossess the car or otherwise confiscate the collateralized asset.

Prepare for the Inevitable By Planning Now

Here’s what you can do now to mitigate the impact of any debts you leave behind.

• Create an estate plan: A simple will is the most basic kind of estate plan, and it’s sufficient for many. However, more complex asset-distribution schemes, like irrevocable trusts, can bypass probate, shield some assets from creditors and minimize taxes.
• Name a qualified executor: When drawing wills, people often name a family member or heir as the executor, but New York Life recommended naming an experienced party, like an estate attorney, instead. Probate can be a long, complicated and expensive process, and the executor can be held liable for some of the deceased’s debt if the right procedures aren’t followed.
• Invest in life insurance: According to MassMutual, life insurance payouts are not considered part of the estate. They are paid directly to beneficiaries, creditors can’t make a claim for them, and they’re not subject to taxation.
• Consider a gift: The IRS allows individuals to gift assets to people tax-free for up to a certain amount per year — $19,000 per recipient in 2025 — with a $13.99 million lifetime exemption. By gifting money to your heirs while you’re alive, you can keep it out of the reach of creditors after you’re gone.

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