Managing Debt After a Loved One's Death: What You Need to Know

When someone passes away, handling their estate can be emotional and challenging, especially if they leave behind debts. Understanding what happens to those debts and how to manage them is key to a smooth probate process.

What Happens to Debts When Someone Dies?

When a person dies, their debts do not simply vanish. Their estate is responsible for paying off any remaining balances. The estate includes any money, property and assets the deceased owned. The executor, or administrator, if there is no will, is tasked with sorting through these financial matters. However, debts are typically paid off in a specific order.

Certain debts take priority if the estate lacks sufficient funds to cover all debts. After that, the remaining debts are often written off. According to Money Helper, surviving family members are generally only responsible for paying off debts if they were co-signers or guarantors.

Who Is Responsible for Paying Off the Debts?

The responsibility for handling debts lies with the executor or administrator of the estate. This individual settles debts from the estate before distributing any remaining assets to beneficiaries. If the executor overlooks debts or distributes the estate prematurely, they could be held personally liable.

However, it's possible to avoid these risks by posting a notice to creditors in a local newspaper. A notice helps ensure that all creditors can claim their debts before the distribution of the estate. Consulting a probate attorney can help with legal compliance and risk management, if the estate is complex or involves significant debts.

How to Identify and Sort Out Debts

One of the first steps in managing the estate is to gather and review financial documents to identify any outstanding debts. These debts can be categorized as individual or joint.

• Individual debts, such as credit cards or personal loans, are solely in the deceased's name. These debts are paid from the estate.
• Joint debts, such as a joint mortgage or a loan, are shared with another person. The surviving party typically becomes responsible for the remainder of the debt. However, the deceased may have insurance policies that cover these debts.

If debts are secured against property, such as a mortgage, the terms of ownership—whether joint tenants or tenants in common—will affect how you must handle the debts.

What Happens If the Estate Can't Cover All Debts?

If the estate is insolvent, meaning it cannot cover all the debts, debts are paid in priority order:

1. Secured debts, like mortgages, are paid first.
2. Priority debts, such as taxes or utility bills, come next.
3. Unsecured debts, like credit card balances, are settled last.

Once the estate's assets are used up, any remaining debts are typically written off. However, handling an insolvent estate can be tricky. Working with a probate attorney is beneficial because they have the know-how to unravel these complex legal situations.

What Should You Do If You're Struggling with Debt after a Loved One's Death?

Managing debt after losing a loved one can feel overwhelming. If you're struggling, help is available. A probate attorney can guide you through the legal aspects and may help explore options to reduce the financial burden.

By seeking assistance from professionals and taking the time to understand the process, you can reduce your stress and handle the estate's debts properly.

Get Help Managing Estate Debts — Speak with a Probate Attorney Today

Managing debt after a loved one's death is often complicated, and mistakes can be costly. Contact our law firm today if you need help navigating probate and settling debts. Schedule a consultation to learn more about creating a plan, properly managing probate and securing peace of mind.

Key Takeaways

• Understand Debt Responsibility: When someone dies, their estate handles the repayment of debts, protecting loved ones from direct responsibility.
• Prioritize Debt Payments: Probate ensures that debts are paid in a specific order, from secured to unsecured, minimizing confusion.
• Seek Legal Guidance: A probate attorney can help you navigate the complexities of debt management, preventing mistakes that could lead to personal liability.
• Manage Insolvent Estates: A probate attorney can guide you through handling insolvency, if the estate can't cover all debts.
• Reduce Financial Stress: Consulting with a probate attorney can help ensure that you handle debts legally and efficiently, reducing the burden on your family.

Legacy One Law Firm, APLC is an estate planning law firm in Los Angeles, California, serving families throughout the State. Schedule a quick and easy consultation with our estate planning attorney, Sedric E. Collins, Esq., or call 323-900-5450.