What happens when a loved one dies with medical debt?

As we age, most of us will require some sort of medical treatment and it won’t be cheap. According to Fidelity Investments’ Retiree Health Care Cost Estimate, a 65-year-old retiring this year can expect to spend an average of $172,500 in health care and medical expenses over the course of their retirement. That’s more than 4% higher than last year’s estimate and up from $80,000 in 2002. As medical costs continue to rise, more families are becoming concerned about covering those costs – especially if a loved one dies with unpaid medical bills. Unfortunately, those bills don’t disappear. Who’s responsible for paying that debt?

When that first medical bill comes after a loved one dies, many families fear they will have to foot the bill. The good news is that’s typically not the case due to probate. During the probate process, outstanding debts are paid out of the deceased person’s estate. In most cases, the estate pays off debts in order of priority determined by state law. For example, if there are outstanding funeral expenses or unpaid taxes, those items may be paid off first before secured debts and outstanding medical bills. If the estate runs out of money, or simply can’t cover outstanding medical debt, creditors will eat the cost and will not go after family members unless they’re found legally liable.

Family members will likely be responsible for paying off the debt if they cosigned for the medical debt, shared the account with the deceased or live in a state with “filial responsibility” laws which require adult children to financially support parents who are unable to support themselves. If you’re a surviving spouse, you may be responsible for paying the medical debt depending on where you live.

I’ve seen spouses get stuck with the bill if they live in a community property state such as California or Texas. In these states, debts incurred during the marriage are often shared. For families concerned about this, check your state’s laws. Certain strategies, such as Medicaid planning, can sometimes shield assets. It’s also important to note certain assets, such as retirement accounts and life insurance policies with named beneficiaries, are protected from third-party debt collectors.

Creditors will try to collect medical debt

Unfortunately, your debt doesn’t die with you and creditors will do their best to get their money. This could mean targeting surviving family members, but creditors should never harass those family members.

I’ve dealt with aggressive collectors in estate cases, and the Fair Debt Collection Practices Act has been a saving grace for many of my clients. It’s designed to prevent third-party debt collectors from abusive, deceptive and unfair collection practices such as calling you at inconvenient times, lying about the amount that is owed, pretending to be a lawyer or a government official, or making threats. Third-party collectors must also send a written notice of the debt including the amount owed, the creditor and your right to dispute it within five days of contacting you.

Dealing with unpaid debt after a loved one’s death of a loved one can be stressful, but there are measures in place to protect your assets and your rights. Unless you have cosigned on the debt or live in a community property state, you aren’t personally responsible for the debt in most cases.

If you believe you’re being harassed by third-party collectors, document all communication. Keep a call log and save voicemails, texts and letters. You also have the right to send a cease communication letter, which bars collectors from contacting you except to notify you of a lawsuit or that collection efforts are ending.

You can also dispute the debt. Within the first 30 days of contact, send a written request for verification of the debt. Creditors must pause collection until they provide proof. You can also file a complaint with the Federal Trade Commission or your state attorney general’s office.

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Phil Reed is an attorney and owner of Reed Law. Contact him at [email protected].