What Happens to Medical Bills When You Die?

What Happens to Medical Bills When You Die?

Your medical bills don't go away when you die, but your survivors generally aren't responsible for paying them. Medical debt is paid out of your estate. (Your estate comprises all the assets you owned at death.)

All your outstanding debts when you die, including medical debt, must usually be paid before your heirs receive any money from your estate. Here's how it works:

• If you had a will, the executor you named uses money from your estate to pay your outstanding debts.
• If you didn't have a will, a judge decides how to distribute your estate and chooses an administrator to carry out these decisions.
• If your assets are greater than your debt, your estate is solvent, and the debt will be paid.
• If your debt is greater than your assets, your estate is insolvent. The court decides which creditors get paid; some creditors may get only partial payments or nothing at all. Your estate may be required to sell some assets, such as your car or home, to pay the debts.

If your estate cannot pay your medical debts, your family generally isn't responsible; the creditors simply write off the debt.

However, your family could have to pay your medical debt in the following situations:

• Cosigned medical bills: Getting medical treatment usually requires signing paperwork taking responsibility for bills your insurance doesn't pay. If someone else signed these documents for you, they could be accountable for your medical bills. This varies depending on state laws and the specifics of the documents.
• Filial responsibility laws: Some states have laws that hold adult children responsible for financially supporting parents who can't support themselves. However, the laws are rarely enforced, because Medicaid typically pays for the parent's medical care.
• Medicaid estate recovery: If you receive Medicaid and are over age 55 when you die, your state's Medicaid program tries to recover the payments they made for your nursing facility services, home- and community-based services, hospital services and prescription drugs. Any money recovered comes from your estate; your survivors aren't responsible.

Tip: Medicaid can't pursue repayments if you are survived by a spouse, a child under age 21 or a blind or disabled child of any age.

Learn more: What Is Estate Planning?

Am I Responsible for My Spouse's Medical Debt?

You may be responsible for a spouse's medical debt in a community property state. Community property states consider both spouses equally responsible for debt incurred after marriage, even if only one spouse took on the debt.

The nine community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. (Alaska gives both spouses the option to make their property community.)

Some states have laws prohibiting surviving spouses from being held responsible for their deceased spouse's medical debt or restricting when this can happen. Even within community property states, laws vary, so if your spouse left medical debt, it's best to consult an attorney about your responsibilities.

Learn more: How to Handle Credit and Debt After the Death of a Spouse

What Happens to Other Forms of Debt When Someone Dies?

When someone dies, they often leave behind other debts that family members may be responsible for.

• Nursing home debt: Federal law makes it illegal for nursing homes to ask family members or other third parties to guarantee payment before admitting residents. However, some nursing homes use vague or confusing language to get you to take responsibility for payment, so read any admission papers carefully before signing them.
• Mortgage or home equity debt: If you got a home equity loan to pay for medical care and your spouse was also on the loan, they're responsible for paying it off. If you leave the house to an heir, they may inherit the debt along with the house.
• Cosigned personal loans: If you got a personal loan to cover your medical care and a family member cosigned on the loan, they are responsible for paying it back. Your estate isn't responsible, because your cosigner is still around to make the payments.
• Credit card debt: If credit cards (or special medical credit cards) used to pay for medical care were held jointly with your spouse, your spouse is responsible for the debt. (Authorized users on your credit card account are not responsible for the debt.)

Tip: Even if you die with debt, money held in retirement plans or brokerage accounts, life insurance death benefits and assets held in a living trust are protected from creditors.

Learn more: How to Deal With Debt Collectors

How Do You Notify Creditors of a Death?

If you die with outstanding debt, your loved ones or the executor of your estate should notify creditors of your death. (Getting a copy of your credit report can help them do this.) Once notified, creditors usually pause efforts to collect unpaid bills until the estate has been sorted out. Your creditors may also report your death to the three major consumer credit bureaus: Experian, TransUnion and Equifax.

The Social Security Administration periodically informs the credit bureaus of deaths, but this can take a while. To help prevent identity theft, your survivors or executor can contact the credit bureaus directly to report your death. They'll need to provide a copy of the death certificate. Anyone who's not your spouse must also show proof that they're authorized to act on your behalf, such as a copy of a legal document with a court seal indicating they are the executor of your estate.

Once a credit bureau knows of your death, your credit report is flagged, showing that you're deceased. If anyone uses your personal information to apply for credit, the credit bureau will be alerted.

Learn more: What to Do When a Loved One Dies

Can the Death of a Relative With Medical Debt Affect Your Credit?

Typically, the death of a relative with medical debt won't affect your credit, because you are not personally responsible for the debt. However, it's possible you could be held responsible for the debt if the deceased's estate is insolvent and you cosigned on medical debt, live in a community property state or live in a state with filial responsibility laws.

The good news: Medical debt is treated differently from most other types of debt.

• Medical debt under $500 doesn't appear on your credit report and won't affect your credit, even if unpaid.
• Medical debt over $500 can appear on your credit report if the account goes to collections. However, you have a 365-day grace period after the delinquency date to pay the bill before the collection account is added to your credit report.

In addition, 15 states (California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Minnesota, Oregon, New Jersey, New York, Rhode Island, Vermont, Virginia and Washington) have laws prohibiting the use of medical debt in credit reporting.

If you don't live in one of those states, it's important to take action before the 365-day grace period ends. Do the following:

1. Review the medical bills and get any billing errors corrected.
2. Work with the deceased's health insurance to pay the bill.
3. If you can't get insurance to pay the bill, see if the medical provider is willing to cancel the bill, lower it or work out a payment plan.

A collection account for unpaid medical debt stays on your credit report for seven years from the date of delinquency. If you think a deceased relative's unpaid medical debt may have impacted your credit, you can find out by checking your FICO^® Score^Θ and Experian credit report for free.

Learn more: How to Get Help Paying Medical Bills

Frequently Asked Questions

The Bottom Line

Dealing with unpaid medical debt after a family member's death makes an already painful time even more difficult. Proper estate planning can help ensure that your loved ones won't have to worry about your medical bills after you're gone. An experienced estate planning attorney can help you protect your assets so your money goes to your heirs, not to pay medical debts.