How are Debts Handled During Probate?
When a person dies, unfortunately, their debts do not die as well. These debts must be paid out of the deceased person’s estate. This happens during the probate process. All estates go through probate unless there is a trust involved.
If the estate does not have enough money, then the debt will likely go unpaid. However, there are situations in which the surviving family members may have to pay (more on that later). Here’s a look at how debts are handled during the probate process.
Inventory of Assets
The probate process begins with the executor compiling a detailed inventory of the deceased person’s assets. This includes real estate, bank accounts, investments, personal property, and any business interests. The value of each item is assessed to determine the total worth of the estate. This inventory is crucial, as these assets may be used to satisfy outstanding debts before anything can be passed to heirs.
Notice to Creditors
The executor is legally required to notify all known creditors of the deceased. A notice must be published in a local newspaper to alert unknown creditors. Creditors have a limited time to file their claims against the estate, or else they may lose their right to collect.
Paying Debts
Once all claims are submitted, the executor reviews and verifies each one. Valid debts must be paid from the estate’s funds before heirs receive any inheritance. Common debts include credit card balances, unpaid medical bills, mortgages, car loans, and personal loans. If the estate does not have enough money to cover all debts, they are prioritized. Administrative expenses and taxes are paid first, followed by secured and unsecured debts.
Distributions
After all debts, taxes, and probate-related expenses are settled, the executor can distribute the remaining assets to the rightful heirs. If debts consume most or all of the estate, though, some or all heirs may receive nothing.
Will I Be Responsible for Any Debts?
Heirs are typically not responsible for paying estate debts out of their own pockets, but there are some exceptions:
- You are a cosigner on the obligation, like a car loan.
- There is a loan attached to an asset that you inherited, like a home or vehicle.
- You are the deceased person’s spouse and live in a community property state (this does not apply to Florida).
A probate lawyer can help you understand your legal rights and obligations.
Contact Us Today
The probate process is often confusing. For some people, dealing with debts and other elements can be a nightmare.
West Palm Beach probate attorney Brian K. McMahon, P.A., can provide you with the legal support you need after a loved one’s death. We will support you during this difficult time and ensure your rights are protected. Schedule a consultation today by calling (561) 658-1789 or filling out the online form. We serve the West Palm Beach, Boca Raton, Port St. Lucie, and South Florida areas.