-- You're probably going to die with some debt to your name. Most people do. In fact, 73 percent of consumers had outstanding debt when they were reported as dead, according to December 2016 data provided to Credit.com by credit bureau Experian. Those consumers carried an average total balance of $61,554, including mortgage debt. Without home loans, the average balance was $12,875.
The data is based on Experian's FileOne database, which includes 220 million consumers. (There are about 242 million adults in the U.S., according to 2015 estimates from the Census Bureau.) To determine the average debt people have when they die, Experian looked at consumers who died from October to December of 2016,
These were the average unpaid balances: credit cards, $4,531; auto loans, $17,111; personal loans, $14,793; and student loans, $25,391.
That's a lot of debt, and it doesn't just disappear when someone dies.
For the most part, your debt dies with you, but that doesn't mean it won't affect the people you leave behind.
That's the general rule, but things are not always that straightforward. The type of debt, one's geographical location and the value of the deceased's estate significantly affects the complexity of the situation. (For example, federal student loan debt is eligible for cancellation upon a borrower's death, but private student loan companies tend not to offer the same benefit. They can go after the borrower's estate for payment.)
There are lots of ways things can get messy. Say your only asset is a home other people live in. That asset must be used to satisfy debts, whether it's the mortgage on that home or a lot of credit card debt, meaning the people who live there may have to take over the mortgage, or your family may need to sell the home in order to pay creditors. Accounts with co-signers or co-applicants can also result in the debt falling on someone else's shoulders.
"It’s one thing if the beneficiaries are relatives that don’t need your money, but if your beneficiaries are a surviving spouse, minor children — people like that who depend on you for their welfare, then life insurance is a great way to provide additional money in the estate to pay debts," Rayndon said.
Poor planning can leave your loved ones with some significant stress. For example, if you don't have a will or designate beneficiaries for your assets, the law in your state of residence decides who gets what."If you don't write a will, your state of residence will write one for you should you pass away," said James M. Matthews, a certified financial planner and managing director of Blueprint, a financial planning firm in Charlotte, North Carolina. "Odds are the state laws and your wishes are different."
It can also get expensive to have these matters determined by the courts, and administrative costs get paid before creditors and beneficiaries. If you'd like to provide for your loved ones after you die, you won't want court costs and outstanding debts to eat away at your estate.
Remember, estate planning can involve more than just drafting a will. Here are seven documents you'll need to fill out before you die.
Christine DiGangi is a deputy managing editor at Credit.com.
Any opinions expressed in this column are solely those of the author.