Financial Counseling Certification Program (FiCEP) Practice Exam

What should be included on a list of debts and obligations after a death?

1. Only secured debts

2. Only personal loans

3. All debts including mortgages and credit cards

4. Only medical bills

The correct answer is: All debts including mortgages and credit cards

Including all debts, such as mortgages and credit cards, on a list of debts and obligations after a death is essential for several reasons. First, a comprehensive list provides an accurate picture of the deceased's financial situation, which is critical when settling the estate. This list ensures that the executor or administrator of the estate can address all outstanding obligations accurately and fulfill their fiduciary duty to creditors and beneficiaries alike. Mortgages are significant liabilities that often involve secured interests in property, meaning the lender has a claim on the asset until the debt is settled. Similarly, credit card debts represent unsecured amounts that the estate must account for in the settlement process. By including all types of debts, the estate can properly allocate any available assets among creditors and heirs, which is crucial in avoiding any legal disputes. This thorough approach also aids in identifying which debts might require immediate attention or could potentially impact the estate's taxes or the distribution of assets. In contrast, focusing only on secured debts, personal loans, or medical bills would not reflect the full scope of financial obligations, leading to possible oversights and complications in managing the estate.