Is an Executor Responsible for Paying off a Decedent’s Debts?

Included in the list of executor’s duties, is managing the assets of the estate, including its debts.

Included in the list of executor’s duties, is managing the assets of the estate, including its debts.

Confused-DogDebts that have not been resolved before a person passes away, become the responsibility of the executor and the estate. How to handle this common issue is addressed in a recent article from nj.com,“What happens if executor doesn't pay off dead person's debt?”

An executor is the individual who is appointed under a will, to administer the estate of a person who has died. Unless there is a valid objection, the judge will appoint the person named in the will to be the executor. He or she must insure that the decedent’s desires written in the will are carried out. Some of the practical responsibilities are things like collecting and protecting the assets of the estate, obtaining contact information on all beneficiaries named in the will and any other potential heirs, collecting and arranging for payment of debts of the estate, approving or disapproving creditor's claims, making sure estate taxes are calculated, forms are filed and tax payments are made.

The executor is required to gather the assets of the estate and pay the deceased person's debts, before assets are distributed to the beneficiaries of the estate. This includes credit card debt. This can be made much easier by hiring an attorney for the estate (which the executor can select).

As an example, under New Jersey law, if the assets aren’t enough to pay all of the claims against the estate, payment must be made in the following order:

  1. Reasonable funeral expenses.
  2. Estate administration expenses.
  3. Reasonable services rendered to the deceased person by the state office of the public guardian for elderly adults.
  4. Debts and taxes with preference under federal or state law.
  5. Reasonable medical and hospital expenses of the deceased person's last illness, including compensation for those attending that person.
  6. Judgments entered against the deceased person.
  7. All other claims.

An estate planning attorney will know the time requirements for creditors making claims on the decedent’s debts for their state. Creditors are required to present claims to the executor under oath and in writing, within nine months of the day of death in New Jersey, for example. Check to be sure, as these timeframes vary. If claims aren’t presented within the time limits, the estate is not liable to the creditor. There are also timeframes for when the executor may dispute a claim, and how much time the creditor has once they have received notice of the dispute to take legal action.

If the debts of the estate are substantial, an estate planning attorney will be able to assist the executor. This can get complicated and may be less costly, if a professional is engaged.

Reference: nj.com (June 5, 2018)“What happens if executor doesn't pay off dead person's debt?”

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