When a person dies, their debts don’t automatically disappear. Instead, the responsibility for settling the decedent’s debts falls on their estate.
There are very few exceptions, but loved ones typically don’t have to pay for the debts of someone who passes away. Jointly owned debts are typically the most common exception.
What happens during the probate process?
The executor or administrator is responsible for notifying the decedent’s creditors of the death. This can be done by directly contacting known creditors or by placing a public notice in a local newspaper. Creditors usually have a limited time to submit claims against the estate.
The executor or administrator must review the claims submitted by creditors to determine their validity. Debts are typically prioritized to the type. Secured debts, such as mortgages or car loans, and priority debts such as taxes or funeral expenses, generally take precedence over unsecured debts, such as credit card debts or personal loans.
The decedent’s debts are paid from the assets in their estate. If the estate’s assets are insufficient to cover all outstanding debts, the estate is considered insolvent, and the remaining debts may be discharged. Certain assets in the estate plan, such as irrevocable trusts, aren’t claimable for debts.
Should heirs pay debts?
Beneficiaries or heirs are generally not personally responsible for the decedent’s debts unless they have co-signed a loan or are otherwise legally obligated. However, the debts paid from the estate can reduce the value of the inheritance that beneficiaries or heirs receive.
It’s best to consult with someone familiar with estate planning laws to determine how to handle a loved one’s debts. Anyone who’s contacted about those debts should direct the creditor to the administrator of the estate.