The loss of a loved one is a traumatic time, but it’s one that can become even more stressful for individuals who are having to deal with creditors for the person who died. It may behoove these individuals to learn a bit about what happens to a person’s debts when they pass away.
One of the most important things for them to know is that the decedent’s estate is responsible for paying those debts. There are only a few exceptions to this, so understanding those is imperative.
When is someone other than the estate responsible for paying the decedent’s debts?
In most cases, a decedent’s debts are only the responsibility of someone else if those accounts are considered community property in a community property state, have a co-signer or are jointly held. In those cases, that individual is liable for the debt.
When the decedent was the sole account holder, the duty to pay falls on the estate. The creditor must make a claim against the estate. The administrator will have to pay the debts in a specific order as long the estate isn’t insolvent. Once an estate is insolvent, creditors won’t receive any further payments. If there’s anything left in the estate after creditors are paid, it’s distributed according to the estate plan.
Unfortunately, there are sometimes unscrupulous creditors who attempt to collect debts from the loved ones of the decedent. In those cases, the loved ones who are contacted should direct the creditor to the administrator and avoid giving out any personal information. Estate administrators should work with someone familiar with these matters so they can ensure they’re handling the estate properly.
