When someone dies in Virginia, their personal property forms their estate. Before other people can take possession of assets that have been left behind, the estate will generally need to pass through probate court. Part of the process specifically relates to resolving creditor claims and the financial responsibilities of the deceased. Just like the assets owned by an individual become the property of their estate, so too do their financial obligations pass to their estate when they die.
The estate of someone who has recently died in Virginia could be responsible for certain tax debts, hospital bills and credit card balances, for example. Those debts could have a major impact on what happens during probate proceedings.
Debts usually take priority over beneficiaries
Spouses, children and other known beneficiaries often believe that their right of inheritance is the most important consideration during probate proceedings. However, the law actually prioritizes the rights of creditors over the rights of those expecting to inherit from an estate. Therefore, one of the first steps in the probate process involves publishing notification of someone’s death and sending direct written notice about estate administration to all known creditors. Those attempts to communicate with creditors allow parties with an interest in the estate to file the necessary paperwork with the Virginia probate courts.
Hospitals, financial institutions and even the Medicaid estate recovery program could all lay claim to the property left in someone’s name when they die. In some cases, every asset owned by the estate could be at risk of liquidation to pay someone’s debts. It is only after giving creditors notice and paying them in full that the personal representative of an estate can begin distributing assets to beneficiaries.
Debts increase probate timelines
The more financial obligation someone has when they die and the greater the possibility that there aren’t sufficient resources to fully cover those obligations, the longer it may take to resolve the probate process. An executor could theoretically have personal financial responsibility if they fail to pay debts properly presented to the courts and instead distribute assets to beneficiaries. Therefore, they will typically wait until every creditor has had an opportunity to make a claim before proceeding with estate administration. Debts not properly addressed in someone’s estate planning paperwork could therefore increase how long it takes for beneficiaries to finally receive inherited assets.
Understanding the impact that personal debts can have on the probate process can be beneficial for those engaging in estate planning, as well as those handling probate proceedings or waiting to inherit from an estate.