Many people ask whether as family members they can be responsible for a loved one’s debts. Often debts can rapidly accumulate especially if a decedent has had a long illness.
If the decedent left an estate that is solvent, the estate will pay the expenses of a last illness and any debt. The personal representative (trustee, executor, or administrator) will be the one to pay off the debts from the assets of the estate before any distributions are made to beneficiaries. A solvent estate is one where the value of the assets is more than the debts. The personal representative if the decedent had a trust will be the successor trustee. The personal representative if the decedent had a will is the executor. If the decedent had no will or trust, the personal representative will be the administrator.
If the estate is not solvent, it means there are not sufficient assets to pay all the debts of the decedent. If there are sufficient assets to pay some of the bills, the bills will be paid in a certain order. That order of payment is as follows:
1. Expenses of administration 2. Secured obligations such as mortgages and judgment liens 3. Funeral expenses 4. Expenses of last illness 5. Family allowance 6. Wage claims 7. General debts.
If there are insufficient assets to pay all the bills, the beneficiaries will not get a distribution and they will not be responsible for paying any of the debts unless other circumstances exist. For example, if a beneficiary or some other individual co-signed on a loan with the decedent or was a guarantor, that is a contractual obligation which will make the co-signer or guarantor liable for the debt. Without some contractual obligation however, family members are not liable for their loved one’s debts. Even spouses are not liable for a debt that was solely their spouse’s.
Probate and trust administration are a large part of our estate planning practice. We assist trustees, administrators, and executors handle all aspects of administration including payment of debts and distributing assets. Call us if you need assistance with these issues or any other estate planning concerns.