Most of the time, an estate is going to owe debts in one fashion or another. The person who passed away may have done a lot of financial planning and paid off most of their major debts, but there are simply things that cannot be accounted for.
For example, if someone was still earning a living when they passed away, they may have to pay income taxes at the end of the year. That money still needs to be paid even if they passed away during the year. Another example could be property taxes that need to be paid annually, which are still owed for the year in question. Finally, many people simply have monthly credit card bills, payments to utility companies and other things of this nature.
So who has to cover these costs?
There’s no one person that has to pay back these debts, but they are the responsibility of the estate. When the estate administrator begins to make an inventory of the assets and goes through the will and the rest of the estate plan, they are responsible for using the funds within the estate to pay off the debts that are still owed.
In theory, this should not impact the inheritance that is received by those named in the estate plan. But it can reduce the total value of that estate if the plan does not have a fund set aside to pay for these costs.
It’s also important to note that, while the estate administrator is the one who has to pay off the debt, they never have to do it personally. They just have to use the funds from the estate.
Your legal options
If you have any questions about this process, make sure you know about all of the legal steps you can take to protect your family’s current and future interests.