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Do Medical Bills Die With You?

Do Medical Bills Die With You?

In Utah, there is no law that says medical bills go to relatives or family members when you die. In other words, yes, your medical bills usually die with you. However, if you have assets when you die, it is possible that those assets are liquidated and used to pay your medical bills. It’s best to speak with an experienced probate and estate lawyer about your particular circumstances in order to get a definite answer to this question because facts matter.

In most situations, friends and relatives are not responsible for the decedent’s bills if there is not enough money to pay them. In fact, it is illegal for creditors to try to collect the deceased person’s debts from anyone else. There is an exception, however, if the decedent was your spouse and you live in a community property state. In most cases you will not be responsible to pay off your deceased spouse’s debts. As a general rule, no one else is obligated to pay the debt of a person who has died. There are some exceptions and the exceptions vary by state. The law has several exemptions and exceptions in place that cloud the issue of responsibility for medical debt or debt in general. One such exemption would come into play if one spouse incurs a medical bill and then the pair divorces. If a judge had determined during the divorce that both parties were liable for any debts incurred during the marriage, there is potential for a creditor to make a claim against the spouse.

As a general rule, no one else is obligated to pay the debt of a person who has died. Here are some exceptions to that general rule:

• If there was a co-signer on a loan, the co-signer owes the debt.

• If there is a joint account holder on a credit card, the joint account holder owes the debt. A joint account holder is different from an “authorized user.” An authorized user is not usually responsible for the amount owed.

• If state law requires a spouse to pay a particular type of debt.

• If state law requires the executor or administrator of the deceased person’s estate to pay an outstanding bill out of property that was jointly owned by the surviving and deceased spouse.

• In community property states and depending on that state’s law, the surviving spouse may be required to use community property to pay debts of a deceased spouse.

Unless there is an exception, you do not have to take responsibility for the debt of the deceased person. You are not obligated to do this and the creditor or debt collector cannot use unfair, deceptive, or abusive practices to get you to assume responsibility.

If your parents run out of money to pay for long-term care, they usually can qualify for assistance under Medicaid, the federal state insurance program for low income or disabled people. If they were eligible before they applied, Medicaid may cover costs for up to three months retroactively. Once a Medicaid recipient dies, a state by law must try to recover the cost of certain Medicaid benefits, mainly nursing home facility and similar care services, from the estates of recipients age 55 or older. In other words, the state may consider anything of value that the person owned, including a home, as something that can be used to pay off the Medicaid benefits. Even though a person has to be low income to receive Medicaid, there are certain assets, such as a car and home, that don’t count toward the program’s eligibility. There are restrictions on what can be recovered. If the deceased has a surviving spouse, a child under 21 years old or a blind or disabled child of any age, the estate is generally off limits, for instance. Property placed in trusts also can be excluded.

You can still be on the hook for medical bills if you share any property or financial accounts with your parents. If you jointly own a home, for example, the state may put a lien, or hold, on the property, and require you to repay Medicaid benefits when you decide to sell the home. Not paying the lien can make it much more difficult to sell property since the debt shows up on the home’s property title and any future owner would have to pay the debt if you didn’t. Most people leave unfinished business when they die. Not only must their property be distributed or disposed of, someone must pay their outstanding bills, as well. The person who makes these decisions is the executor. The executor is responsible for putting the affairs of the deceased person (decedent) in order, including paying off the decedent’s creditors.

The executor starts by figuring out how much property the deceased person had upon death, called the estate. The estate includes all the decedent’s property, such as houses, cars, and personal property, as well as household possessions. The executor then calculates how many bills the decedent still owed and pays the remaining bills out of the estate. If cash is available, the executor will likely use it to pay creditors. If it is not available, the executor sells the property and uses the proceeds to pay the bills.

If there isn’t enough money in a parent’s estate to settle all his or her debts after death, then an estate can be considered insolvent, which is equivalent to bankruptcy. The person in charge of managing the estate may wish to work with a lawyer to ensure that whatever can be paid to creditors is prioritized so that the most important debts are paid off first. The other debts may be paid in part or not at all, meaning the creditors generally must forgive the debt. If you’re contacted by creditors after that, then reach out to a lawyer for advice.

In general, though, you won’t be responsible for a parent’s unpaid medical bills since those debts can’t be passed on to you.

Many couples often wonder if they share responsibility for each other’s debts. In most states the general rule is that all assets obtained during a marriage are joint property but responsibility for the debts of one spouse does not pass to the other spouse unless the debt was in the name of both parties.

Should you as a spouse receive a claim or complaint for a suit regarding a medical bill or debt, it is important to consult an attorney. An attorney can prepare a proper response to avoid a default judgment being lodged. Over 40-million people are saddled with medical debt. With the cost of healthcare on the rise and insurance coverage on shaky ground for many working class people, it’s becoming harder and harder to pay hospital bills for unexpected emergencies or even routine (but costly) treatments.

Any debts you leave behind when you die can eat up assets that you had hoped to leave to heirs. In some cases, family members could even be on the hook for your debt. Many people buy life insurance not only to leave something behind for their loved ones but also to help deal with any debt and final expenses. Your debts become the responsibility of your estate after you die. Your estate is everything you owned at the time of your death. The process of paying your bills and distributing what’s left is called probate. The executor of your estate, the person responsible for dealing with your will and estate after your death, will use your assets to pay off your debts. This could mean writing checks from a bank account or selling property to get the money. If there isn’t enough to cover your debts, creditors generally are out of luck.

When Others Are Responsible For Your Medical Bills

Spouses and others generally are responsible for paying debts if they:

• Co-signed for a loan

• Are joint account holders

• Are spouses in community property states: Spouses aren’t responsible for debts that predate the marriage, although half of any community property from a marriage could be put toward debt obligations.

Under Federal Trade Commission rules, debt collectors can contact a deceased person’s spouse, parents if the deceased was a minor child, guardian, executor or administrator to discuss the debt. But collectors can’t mislead family members into thinking they’re responsible for paying the debts if they’re not. Creditors typically can’t go after your retirement accounts or life insurance benefits. Those will go to the named beneficiaries and aren’t part of the probate process that settles your estate. Because life insurance payouts are protected from creditors, you can use a policy to protect family members who would be responsible for your debts or simply to make sure you have money to pass on. In addition, life insurance payouts are usually not taxable. Term life insurance policies, which provide a death benefit for a set number of years, are suitable for most people’s needs and cost less than permanent life insurance.

A Solvent Estate

A solvent estate is one where the decedent left sufficient assets and cash to pay off his debts after his death. When the value of everything he owned is added up, including money in bank accounts, you’ll find whether the total exceeds the amount he owed. If the estate is solvent, the executor or personal representative appointed to manage his affairs will pay his bills from the estate’s coffers, liquidating assets if necessary.

This equation includes assets the decedent owned in his sole name and those that comprise his probate estate. Assets that do not have to pass through probate to transfer to living beneficiaries are not included, such as retirement accounts, bank accounts, or real estate that pass directly to a beneficiary by operation of law.

An Insolvent Estate

An insolvent estate is one that doesn’t have enough assets to pay off all the decedent’s bills. When the value of his probate estate is tallied up, the total is equal to or less than the bills he owed. When an estate is insolvent, the personal representative must prioritize payment of the decedent’s bills according to federal law and the laws of the state where he died. State and federal statutes dictate which creditors should be paid in full, which will receive only partial payment, and which will get absolutely nothing. In some states, medical bills take precedence if they were incurred within a certain period of time from the decedent’s date of death, usually 60 days. The personal representative would have to pay these debts first, and creditors such as credit card lenders would have to proportionately share in any money that’s left over.

Unfortunately, the decedent’s beneficiaries or his heirs-at-law typically receive nothing if the estate is insolvent, but neither are they typically responsible for paying off the balance of the decedent’s unpaid debts. The companies that weren’t paid in full usually have to write off their bad debts with the possible exception of nursing homes and hospitals in some states. Some jurisdictions do allow these institutions to pursue adult children for some of their parents’ unpaid medical bills if the estate can’t cover them.

In this case, consumer law trumps estate law. The lender has someone else contractually on the hook for this money, and it is totally within its rights to pursue the son for the entire unpaid balance, just as it would be if the decedent had lived but had defaulted on the loan instead. If the decedent was receiving Medicaid benefits, the state typically reserves the right to seek repayment of these benefits even when the decedent leaves an insolvent estate. This has the effect of pushing these debts to the front of the line for payment in an insolvent estate, although the state typically cannot pursue relatives for payment or attempt to collect if the decedent left a surviving spouse who is still alive. Medicaid rules can be extremely complicated, and they also can vary from state to state. If your parent was receiving these benefits, you’ll want to speak with an attorney to find out where you stand. Should you as a spouse receive a claim or complaint for a suit regarding a medical bill or debt, it is important to consult an attorney at Ascent Law. An attorney can prepare a proper response to avoid a default judgment being lodged against you.

Probate Lawyer Free Consultation

When you need legal help regarding medical bills after the death of a loved one, please call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506