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If you die with debt does your family inherit it?

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if you owe the government the family inherits it

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Debt doesn't die with you, that's what life insurance is for, paying final expenses, including debt.

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Life insurance pays the beneficiaries, not your debts. The beneficiaries are not responsible for your debt. See my answer.
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They can be. My grandmother passed last year, it was stated in her will, I was only beneficiary, I was told in probate court, here in AZ, if there was any outstanding debt, I had to pay that, before I could keep the life insurance money. So, looks like, you are wrong, my friend, not me. Same grandmother, also claimed bankruptcy, after my grandfather died, due to the debt.
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These policies are taken out by people to ensure their debts are covered. My mother had one, too. The primary beneficiary is the estate and you were the secondary beneficiary. You only got paid after the debts are covered. You are never responsible for the debts of others. You may have misunderstood what you were being told.
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I meant pay from the policy.
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a lot of this depends on the state you lived in when the debt was accrued and the state you live in now. federal debts ( like taxes) are a different matter. for all these matters i'd try finding a tax attorney that does some pro-bono work. most cities have law clinics or the equivalent, where they can help you, or direct you to someone that'll help. hope this helps you.

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All of your debts and assets (bank account, house, etc.) pass to your estate when you die. The assets are used to pay the debts and if anything is left it is distributed to your heirs, either according to your will or according to law if you left no will. Debts are paid in a particular order- taxes first, then secured debt (like a mortgage) then others.

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