Debts After Death
When a loved one passes away, probate is supposed to deal with both the property of the deceased and the debts they still owe. It's the responsibility of the personal representative (otherwise known as the executor) to pay the bills left behind, but there are strict limits on what should be paid and when. To find out more, read on.
Debts of the Deceased
One of the main reasons probate came about was because a way was needed to legally handle the debts of the deceased. As time went on, certain types of debts took on more importance than others. Today's probate court rules are still based on very old ideas, but the way the bills of the estate are handled have been modernized to reflect the importance of some over others. That's why family members and personal representatives should refrain from paying any bills without the go-ahead of the probate or estate lawyer. Other than informing the creditors about the death, you shouldn't have to take any action to pay bills until told to do so. Once the creditor is informed of the death, no interest, fees, or other charges should accrue to the account.
The Ranking of Creditors
In most cases, the most important bill to be paid is not the credit card bill but the tax bill. The taxes of the estate are more important in several ways. If a tax return is due, that return must be filed in a timely manner. In most cases, the attorney handling the estate will direct that anything owed to the IRS and the state taxing authority is going to be paid. Also, any property taxes due should be paid. Also among the top categories of bills to be paid are those relating to preserving and maintaining real estate. Some types of damage can come to a home without the utilities turned on, so the water, gas, and electricity bills may need to be paid too. Any storage facility bills may also need to be paid right away.
What About Credit Card Bills?
It's important to note that the funds for paying any estate-related bill have to come from the estate itself. Loved ones are not responsible for paying those bills. If there are no funds to pay them, then the bill may never get paid. That is what happens to many credit card balances. The creditors know how low on the list they appear and they seldom take action for their share of the estate. With credit card debt, no property can be taken because it's often considered an unsecured debt.
It should be noted that the above pertains to situations without a surviving spouse. To find out more, speak to your estate planning attorney.
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