When you buy a car, take out a loan, or get a credit card in your name, you have a legal obligation to pay back that debt. The good news is that your spouse or family members are not responsible for these debts if you pass away. However, that doesn’t mean that creditors will not come calling to recover what you owe.
How Executors Should Handle Outstanding Debts
When a person dies, all of their money and property is accumulated into one entity called their estate. During probate proceedings, any outstanding debts must be settled using property and funds from the estate. If the deceased died with no assets, creditors are generally not able to collect on their debts.
If you have been named as the administrator or executor, you can help protect the estate by:
- Addressing jointly-held debt. Beneficiaries usually cannot inherit a loved one’s debt, but there is an exception. If someone else’s name is on the debt—such as a joint credit card or a loan obtained with a co-signer—the surviving account holder could be left to pay the remaining balance on the account.
- Stopping family members from accidentally committing fraud. Credit card companies allow an authorized user to charge items without sharing responsibility for the debt. However, if an authorized user continues to use the card after the main cardholder passes away, they could be committing fraud.
- Waiting to distribute assets to heirs. Family members may put pressure on you to distribute heirlooms, promised sums of money, and other assets from the estate as soon as possible. Unfortunately, any distributions you make before the estate has settled its debts can cause problems—including potential litigation among family members or putting heirs on the hook for the debt.
If you need help administering an estate in New York, Landskind & Ricaforte Law Group can answer your questions and make the probate process as smooth as possible. Contact us today through our online form to learn how we can help.
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