One thing that probate does do a good job of is dealing with the debts left behind by the deceased. In fact, one of the main reasons that probate exists is to make sure that those owed money by the deceased could be part of the estate settlement. If you have been appointed executor or if you are a close family member to the deceased, it may be helpful to understand something about how probate handles the debts of the deceased. Read on to find out more.
Make a List of Debts and Creditors
Not all creditors have equal footing when it come to probate. That just means that some debts are more important than others. For example, the probate court prioritizes debts that might begin with tax debts and that place debts like credit card balances at the bottom of the list. To know what needs to be paid and when, consult with your estate lawyer before you start writing checks. In the meantime, make a list of all debts that include:
- Mortgages, rental leases, condominium, and homeowners' association fees (HOA)
- Personal loans, bank (signature) loans, and paycheck lending loans
- Credit cards
- Vehicle loans and car title loans
- Utilities and unpaid medical bills
- Taxes owed to the IRS, the state, and property taxes to the county
Categorize the Debts
In general, bills will fall into two main categories — administrative and final.
- Administrative Bills — This category includes expenses that cover the upkeep of other property during probate. Real estate, such as the family home or vacation home, must be kept in good repair. That means different things in various parts of the country. You might need to leave some utilities connected and paid, see to yard work, make home repairs, and other needed tasks to keep everything running at the home. Condo and HOA fees must usually be paid at this time too.
- Final Bills — These bills are directed by the probate court to be paid at the end of the probate process. They might include tax debts, personal loans, and more.
Funds to Pay Bills
Executors are not expected to take care of estate bills from their own personal funds. The bills that get paid are directly proportionate to the funds available within the estate. Many times, low priority bills are not paid because the funds are not available to pay them. In some cases, the probate judge could order estate property to be sold to pay high-priority debts.
Reach out to a law firm to find out more about estate debts and more.Share