Losing a loved one can be an emotionally trying time, so you probably want your relative’s estate to clear probate so you can seek closure. However, sometimes difficult issues turn up during probate. For instance, your relative may have some outstanding debts. This might complicate probate and involve your relative’s estate or even other family members in court proceedings dealing with creditor claims.
You may wonder whether you and your family members will be responsible for paying off the debts of your loved one. The Federal Trade Commission explains different situations that may require family members or an estate to settle debt.
Relatives generally do not pay
Creditors usually have no cause to seek out a decedent’s relatives for debt payment if the decedent was the sole owner of the debt. However, it is possible for relatives to become responsible for a loved one’s debt if they had co-signed the debt in the first place. Surviving relatives may also be responsible if they shared a credit card or another joint account with the decedent. A surviving spouse might also have to pay certain health care costs if required by law.
The estate usually has to pay
In the vast majority of cases involving the debt of a decedent, creditors will make claims against the decedent’s estate. They will seek compensation from the assets of the estate. In the event there is no money left in the estate, the debts will likely go unpaid.
Since an executor must settle creditor claims before paying out to beneficiaries, claims against the estate can be a serious concern for estate beneficiaries. They may find their inheritance diminished or even wiped out to pay off the debt. Fortunately, an executor may also contest creditor claims in court. If a judge decides that the claim is invalid, the estate does not have to pay.
Executors may have to pay
An executor should make sure to settle all creditor claims before dispersing an estate to beneficiaries. In the event a judge rules that a creditor has a valid claim and the executor has already paid out the estate, the executor may become personally liable for the outstanding debt.
Handling debt claims after the death of someone you care about can be emotionally stressful. With a competent executor and legal representation, your relative’s estate may stand a chance of protecting much if not all of your inheritance from creditor claims.
