When someone passes away, the estate likely has both assets and debts. In some cases, these debts are very minor, such as a few hundred dollars on a credit card. In other cases, that debt could be significant, such as business loans or home mortgages for hundreds of thousands of dollars.
The assets get divided between the heirs and beneficiaries, and this starts with a will. There are other estate planning tools that may be used as well, such as a trust, but the general goal is to split up those assets. But who splits up the debts? And do those debts have to be repaid?
The estate is responsible for paying back the debt initially
The first thing that should happen is that the estate executor should identify what debts there are. It is then their job to use the assets from the estate to settle those debts. They will have access to the deceased person’s bank account and other financial assets, so they can pay back what is owed and close those accounts.
In some cases, it’s impossible to pay off all of the debt that someone has with the assets in the estate. This can be difficult for the surviving family members, as they may not get the assets that they anticipated. However, it is important for them to know that they don’t have to pay off any more of that debt. Whatever assets are in the estate can be used, but the debt does not pass on to the next generation.
Navigating the probate process can be complex when there are a lot of assets and debts to consider, and it’s important for all involved to understand their legal options.