Estate administrators have a host of responsibilities to tackle once a close friend or loved one passes. If you are named executor of the estate in a last will and testament, you know firsthand the tasks that you must complete in order to finalize the estate.
One question you may have is whether the estate is responsible for paying any outstanding debts and expenses owed by the deceased at the time of his or her passing. While you may pay certain debts out of the estate’s value, there are other items that you are not responsible for.
Do debts disappear upon death?
Some financial institutions may forgive debts once someone passes. However, creditors may seek payment on certain accounts, even after the responsible party dies, according to Nerd Wallet. This includes the following:
- Credit card debt
- Private student loans
- Medical expenses
- Mortgages or home equity loans
With car loans, you may choose to keep paying on the vehicle, sell the vehicle to pay off the loan or have the lender repossess the car.
Who is responsible for paying the debt?
In many circumstances, a surviving family member has no legal responsibility to pay existing debts of the deceased as reported by the Federal Trade Commission. Collection agencies can not use deceptive, abusive or unfair tactics to obtain payments from you, according to the Fair Debt Collection Practices Act. Yet, if there is a co-signer or joint owner on the loan, credit card or mortgage, he or she is then responsible for repaying the existing balance.
The estate administrator or executor of the estate handles payment of existing debt through the estate’s value. If the estate can not cover all of the expenses, the remaining may go unpaid. The deceased may leave money through their life insurance policy to help pay off the debt or you can sell items from the estate to help tackle any remaining costs.
Handling the left over expenses of a loved one is not easy. Yet, preparing yourself with the knowledge of what to expect can help simplify the process.