Who Is Responsible for Paying Estate Debts?

If you are an executor or the relative of someone who has passed away, you may start to worry as you open bills in the mail, wondering if you are going to have to personally pay these costs and estate debts. The good news is that usually, you don't have to. Usually, the estate property goes toward paying any estate-related costs and any debts the decedent had while alive. The executor transfers the money from a decedent's checking or savings account into an estate bank account, so as to draw on those funds when bills arrive. Still, there are instances where you could on the hook for an estate's expenses or debts.

Who Can Be Liable for Estate Debts

The type of debt involved as well as state laws would determine whether or not a surviving spouse is liable for a deceased spouse's debt. A surviving spouse would be responsible for joint debts, such as joint credit card debt, regardless of who made which purchases. But if a debt belonged only to the deceased spouse, under some state laws, creditors cannot go after the property of the surviving spouse.

A cosigner could be liable for estate debts if the decedent's property is not enough to pay off a loan or line of credit that was cosigned. These are the terms of being a cosigner, after all, saying that you will pay the debt if the primary debtor is unable to.

Finally, a sloppy or unscrupulous executor might have to pay out of pocket for a decedent's debts. So if underhanded dealings result in lost money for the estate, the executor would have to pick up the difference. If a reckless executor pays off credit card debts before the assets and debts are tallied and the debts prioritized, it could be that the estate cannot cover every debt. If, for example, there are medical bills that should have been paid before the credit card debt was touched, then the executor would have to repay the estate for the credit card payment.

When You Could Be Liable for Estate Expenses and Debts

Immediate Expenses
Now if estate funds are not yet available, and there are expenses that must be paid right away, a relative or executor may have to use their own money to pay these bills and costs. This could be the case when burial or cremation has to be paid for. Utility bills and mortgages still have to be paid, and so do car payments and real estate taxes. This is true even if, for example, heirs do not want a house with an underwater mortgage. Utility bills would still have to be paid if you want an easier job of selling the house. If you keep a detailed account of these expenses, the amount, the timing, the need for it, then you can get reimbursed when the estate funds become available.

An Insolvent Estate
However, if you do not believe there will be enough funds in the estate to pay off a decedent's debts, then you may want to wait before you pay any creditors, whether it is with estate money or your personal funds. For one thing, it could take several months to a year before all creditors have made their claims, and only then can all these creditors be prioritized. Only the high-priority creditors might get paid off by the estate. If you pay debts before this process, you could end up paying low-priority creditors, meaning that you might personally be liable for this unnecessary payment, such as in the example of the hasty executor above.

What happens if an estate does not have enough liquid assets to pay off debt? Then the executor can sell property and other assets in order to satisfy these debts, but of course, that will be a rather tricky process, as there may be many assets that were expressly meant to be passed down to beneficiaries. If an executor only sells the assets going to one beneficiary and leaves everyone else's inheritances untouched for the most part, then that would be deeply unfair, a breach of duty on the part of the executor. With the help of a skilled probate attorney, you could navigate this complex situation in order to uphold your duties to beneficiaries and to take care of an estate's debts.

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