Learn Important Probate Essentials, including key things that go wrong in an estate, how to prevent them, and what to do if they happen.
If the value of the estate covers the deceased person’s debts, the beneficiaries or heirs will still receive some amount of inheritance and you don’t need to worry about lacking funds. However, if it looks as though there is not enough money in the estate to cover the debts, then it is important to seek legal counsel. State law gives priority to certain creditors over others. Typically expenses incurred for the funeral and administration of the Estate are covered first. Items such as medical expenses for the deceased person’s last illness are next, followed by federal taxes, state taxes, real estate liens, mortgages in order of priority, and then other debts.
If looks like the debts can’t all be paid, the executor and beneficiaries/heirs will not be responsible for paying back those creditors so long as the Estate is handled properly. Rather, the creditors must take the loss and the heirs will not inherit anything.
All of the assets of the estate – not just money – are subject to being used to cover as much debt as possible. Unfortunately, that means that the Personal Representative may be legally required to sell Estate property, including the Estate home, to pay Estate debt.
Fortunately, there are sometimes legal ways of reducing or eliminating creditor claims so that the family receives an inheritance and certain important property can be saved.
If you have questions or find yourself in this situation, please contact our team for a complimentary consultation.
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