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Who pays the debts for an estate?

On Behalf of | Jan 27, 2023 | Estate Administration |

When someone passes away, the estate administration and probate process is where their assets get divided among their heirs. Ideally, this person will have created a will or an even more complex estate plan to demonstrate how this has to happen. They can give guidelines and instructions for how assets should be divided or directly leave specific assets to a certain heir.

However, most people are going to have some level of debt, as well. This could be substantial debt that the heirs may not know about, such as if the person took out numerous car loans, business loans or mortgages. But it could also be minor types of debt, such as remaining credit card bills, payments for utilities and the like. Finally, you may have some governmental costs that have to be covered, such as property taxes that are owed or income taxes for the person’s last year of work.

The estate administrator is in charge of distributing the assets to the heirs. But does that mean they also have to pay off the debts?

They use the estate to do so

This does mean that the estate administrator has to pay off the debt owed by that estate, as it’s one of the duties that they are given when they take on this role. However, estate administrators should not worry about any sort of personal financial responsibility. They do not have to pay the debts off themselves, but they simply have to use the money from the estate to do so.

This may mean that the estate doesn’t contain enough financial assets to cover all of the debts. In a case like that, the administrator is not responsible for the remaining debt. They simply pay off what they can and then follow the estate plan to the best of their abilities – although high levels of outstanding debt may mean that people do not inherit as much as they expected.

This process can become complicated and all involved need to know about their legal options.