When a person passes away, resolving their debts becomes an integral part of settling their estate. The process is overseen by the estate’s executor or administrator, who works in accordance with the law to fulfill these obligations.
Understanding this process can alleviate concerns about the impact of debts on the estate and the responsibilities of loved ones left behind.
Estate’s responsibility to pay debts
Upon death, the deceased person’s estate becomes responsible for their debts. The estate comprises everything the person owned at the time of their death, including money, property and other assets.
The first step is to use the estate’s assets to pay off any outstanding obligations. This may involve liquidating assets to generate the necessary funds. Debts are typically paid in a specific order, which usually prioritizes taxes and funeral expenses before other creditors. An estate is insolvent if the debts can’t be paid.
Loved ones and debt responsibility
Generally, loved ones aren’t responsible for the deceased person’s debts unless they were joint debts or the loved one co-signed for them. For example, if the deceased had a mortgage or a credit card in both their name and a surviving spouse’s name, the survivor might be responsible for continuing those payments. Similarly, if someone co-signs a loan with the deceased, the co-signer will likely be held accountable for the remainder of the debt.
While creditors may contact family members of the decedent, they shouldn’t try to get payments from them. The only information that should be provided to the creditors in the event of contact is the name of the estate administrator or executor so they can make the claim against the estate as necessary.
It’s critical that anyone who has lost a loved one understands their rights and responsibilities in these situations. An estate administrator should also know how the debt claims work in these cases. Seeking legal guidance may benefit everyone involved so they know things are being handled in the best interests of the estate.