Before you can distribute your loved one’s assets, you must settle all their outstanding debts using the estate’s assets. As the executor, understanding the ins and outs of this process can help make estate administration much easier.
How are debts paid after someone dies?
Generally, your loved one’s estate will pay for any existing debts. Their estate is a lump sum of their assets, which may include their house, vehicles, jewelry, financial accounts and other valuables.
After filing the will in probate court, you must inventory the estate and appraise assets. These steps will help determine the estate’s value which, in turn, tells you how much money is available for debt settlement and if you need to sell any assets to repay debt.
Then, you as the executor are responsible for repaying any existing debts, such as:
- Mortgages
- Auto loans
- Credit card debt
- Personal loans
- Outstanding medical bills
Take note that secured debts, such as mortgages or vehicle loans, may be repossessed or foreclosed if the estate cannot pay for them.
Will surviving family members be responsible for unpaid debt?
What if your loved one’s debts exceed the estate’s value? Will the family be responsible for the remaining debts?
Generally, no. If there is no money left in the estate, the debts will remain unpaid. There is an exception, however, if someone is a co-signer or a joint account holder. They may assume responsibility for the remaining debt.
Furthermore, Florida follows a noncommunity property system. This means that a surviving spouse will not be responsible for the debts of the deceased unless they co-signed or held a joint account.
What about debt collectors?
If you are the executor or surviving spouse, debt collectors may try to contact you about unpaid debts. However, you are not legally responsible for paying for the debt unless you fall under any of the exceptions mentioned above.
Likewise, debt collectors cannot say or imply that you must pay for the debt from your own pocket, much less harass you for payment. This goes against the Fair Debt Collection Practices Act.
Always be mindful of your rights and responsibilities
Knowledge is the key to making estate administration more manageable. If you are unsure how to handle debt repayment, talking to a lawyer may be beneficial. Experienced legal guidance can help you navigate the process and avoid common pitfalls along the way.