People are often very aware of the fact that they are going to pass away with assets. They want to make sure that their assets go to their children. They create an estate plan so that they can do things like determining who gets which assets, reducing the amount of taxes that they have to pay and giving their family some guidance. This is especially true for those with a high level of wealth or who own a business, but it also applies to anyone who has accumulated assets in their life.
However, the truth is that most people are going to pass away with at least a little bit of debt. Some people are going to have car loans and a mortgage. Others are going to have unpaid medical bills or student loans. Still others are going to have outstanding credit card debt, property taxes or income taxes. There are a lot of different accounts that have to be paid. Whose responsibility is it?
This is typically done by the estate administrator
Generally speaking, an estate administrator – sometimes called an estate executor – is in charge of managing the entire estate. They have been named in the legal documents, they’ve been given a copy of the will and it is their job to follow that will. They are the one who informs the heirs about what they deserve, who inventories the assets and who distributes those assets to the people instructed to receive them.
At the same time, this administrator has to close out those accounts by paying off the debt that is still owed. Some debts will have to be paid to the government, such as taxes at the end of the year, and others have to be paid to private institutions. The estate administrator is the one who does this.
That being said, the estate administrator only has to pay the debt off with money from the estate. They don’t have to use their own money, and they’re certainly not liable for that debt. This is why part of an estate plan may include creating a fund to cover these costs.
No matter where you are in the estate planning process, be sure you know what steps to take to create the right plan for your family.