If your loved one has passed away, one of the things that will need to happen is for all of their debts to be resolved. Claims may be made against the estate by their creditors, and that can be tough to handle.
Understanding your role in this process is critical for any executor of an estate.
What are the first steps to take regarding the deceased’s debts?
Fortunately, there is a process that is already in place that you can use to help manage the estate if you’re the executor. You will need to:
- Find all of the decedent’s debts
- Determine if those debts are valid
- Pay off those debts with the estate’s assets
It’s important to note that certain debts come before others. For example, administrative expenses, such as the legal or accounting fees for the estate, come first and must be paid. Then, reasonable funeral expenses are next.
Debts that are preferred under federal law come after that. Those include taxes and some other types of debts. Once those are paid, then the executor should move on to the medical bills for the decedent. State taxes and debts follow this, as do debts related to reimbursing benefits.
Finally, all other debts can be paid. Those might include things like credit card debts or verbal debts that have been confirmed.
How are these debts paid?
These debts should be paid out of the estate. There may already be funds willed to beneficiaries, but if there aren’t enough funds to repay debts, then those could be spent to cover the debts that were owed. This is why finding and confirming the debts is so important. Doing that step could help preserve more assets for family members and other heirs or beneficiaries.
Our site has more on paying off debts and what you need to know about estate administration. Please continue reviewing our site to learn more.