Many people still have outstanding debt when they pass away. Some people pass away unexpectedly, and they may still have major debts like business loans or mortgage loans. But even someone who has addressed all of their major debts could still have credit card bills, property taxes, income taxes and other financial obligations that remain when they die.
As that person’s estate goes through probate, what happens to this debt? Who is in charge of addressing it? Is the debt eliminated or passed on to the next generation?
The estate executor
Creditors can make a claim against an estate after someone passes away. A credit card company could make a claim to collect the outstanding balance on the credit card account, for example. The debt still remains, even after the person’s passing.
It is the job of the estate executor to handle these claims. They have access to the deceased person’s financial assets, including their bank accounts. Therefore, they can use the funds from the estate to pay off any financial obligations.
What this means is that beneficiaries do not need to worry that they will somehow inherit this debt or have to take it on themselves. It is not their responsibility. Instead, the person’s estate pays down the debts – these financial obligations often must be handled first – and the remaining assets are then distributed to beneficiaries.
Navigating the probate process
Inventorying assets, handling debts and contacting beneficiaries are all important parts of the probate process. Those involved must be well aware of their legal options and the steps they will need to take.
