Dealing with a death in the family is already tragic and stressful. Adding debt into the equation can make things even more stressful. If the debt in question was a credit card debt, the debt is expected to be repaid by the debt owner whether they are alive or dead. Who owes that obligation after the passing of the debt owner?
Are You Liable?
If you are an heir to an estate, you will inherit all of the possessions of the deceased individual without any of the credit card balances or debts. However, if you were a joint account owner on any of them, you are jointly liable for the remaining balance. It does not matter if the deceased accrued all of the debt independently. All that matters is that your name is also on the account. Even if you are not liable for the debt, creditors may attempt to collect from you anyway.
The Estate Outlasts the Individual
Whenever someone passes away, an estate is formed. The estate has one person in charge of distributing the assets, who is listed in the will and confirmed by the court to handle every financial transaction on behalf of the deceased, including paying debts and distributing remaining assets. If you are the executor of the will, you will be in charge of settling debts.
Once the estate has taken care of settling outstanding debts, the assets can be distributed. If the estate has more debts than assets to repay them, creditors are forced to write off the remaining debt. A lawyer should be involved with the distribution to creditors to ensure that nothing is missed before assets are distributed to beneficiaries.
What Happens in the Meantime?
Sometimes the court can take a while to appoint an executor, which means that bills will keep rolling in before the estate money is accessible. In almost every case, the ones inheriting the estate should take care of paying any reoccurring bills such as utility, mortgage, house or car insurance, car payments and real estate taxes, since letting those bills go unpaid could lead to the loss or damage of a property. As long as receipts are kept, the payments that are made can be reimbursed with money from the estate.
Consult Your Advisor
If you have any concerns about the debts of decedents and distribution from estates, you should contact Miles Tax Advisory today. We are always here to assist you!