Adults who create an estate plan often don’t think about what will happen to their debts when they die. When this occurs, loved ones often wonder if they’re going to be responsible for having to pay those debts.
In most cases, loved ones don’t have to pay the debts of the decedent. Instead, the creditors can make a claim against the estate. Once they take that step, determining the order in which to pay the debts becomes the priority.
Creditor claims against a decedent’s estate
The estate can pay off debts by liquidating assets. Beneficiaries can’t be paid until all the creditor debts that are required to be paid are satisfied. Once those debts are paid, the remainder of the assets can be divided among the beneficiaries in accordance with the estate plan.
Circumstances in which loved ones may have to pay
While loved ones typically don’t have to pay for a decedent’s debts, there are times when they will be responsible for them. If the person was a joint account holder or co-signer for the decedent’s accounts, they will be liable for the debt. Absent of that, they likely won’t have to pay them.
Sometimes, loved ones may be contacted by a creditor who is trying to collect a payment. They shouldn’t ever give the creditor any information except the administrator’s contact information. No financial information should ever be provided to the creditor unless the individual is confident that they’re responsible.
People who are working on their estate plan may be able to take steps to preserve assets for their loved ones. Working with someone who can assist them with determining their options and getting the plan set can help.
