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What if there aren’t enough assets in an estate to pay off debts?

| Jan 19, 2021 | Estate Administration & Probate |

As an executor, your primary obligation is to resolve all of the outstanding obligations of someone who has recently died. You may need to probate their property, have utility accounts moved into the estate’s name and pay taxes on behalf of the deceased.

If they have debts, you will need to make sure that you pay those off as well. As an executor, you have a responsibility to fulfill those financial obligations during estate administration and probate proceedings.

What if there aren’t enough assets to pay off the debts that the deceased person owns?

Are there any co-signers for the debt?

If the deceased has a surviving spouse and that spouse cosigned for the line of credit or account, that individual may have personal responsibility for the outstanding debt. The creditors can and probably will hold them responsible for the account.

If no one else is named as a borrower on an account, and only the deceased individual has responsibility for it in that scenario, it is solely the responsibility of the estate to pay it off.

What debts do you have to pay?

While you may treat some debts as more important than others, like tax obligations, most other debts have equal standing under the law. The estate must repay credit card companies just like they should medical providers and mortgage companies. No debt simply vanishes because the person who owed it died. You will have to repay even the most frivolous debts until there are no assets left to use.

Have you given anything to estate beneficiaries?

If no one else has the responsibility for the debt and you don’t have any property in the estate to repay it, the most important question becomes whether you have distributed property to heirs and beneficiaries or not. You may need to ask for that property back if you have.

If you can’t reclaim that property, it is possible that creditors may be able to come after you personally because you failed in your duty to repay debts before those assets went out to other people. Getting help and support during estate administration can help you avoid mistakes that might have personal repercussions for you as the executor.