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Protecting Your Legacy

How debts can be handled when administering an estate

| Apr 22, 2016 | Estate Planning |

Most people are familiar with the old adage “you can’t take it with you.” This refers to the reality that once you pass away, you cannot take your riches with you into the afterlife (or your next life, depending  on your beliefs. As such, your wealth, as well as your debts, stay behind.

This raises some interesting questions about what happens to one’s debts after the person owing them passes away. Essentially, who would be responsible for paying these obligations? Moreover, who would have the right to collect on such debts?

This post will briefly explain. 

Generally speaking, a person’s estate would be responsible for paying outstanding debts that the deceased would normally pay. This is why life insurance policies are used to pay off debts such as a remaining mortgage balance, unpaid utility bills and credit card debts. However, there are several exceptions to this depending on how the debt was structured (among other people) and how long the debt has been outstanding. Also, Texas law allows some creditors to bring suit against the estate to collect on outstanding debts.

In the midst of administering a person’s estate, an executor may have to verify whether a particular creditor has a lawful claim against the estate. After all, not every creditor that makes a claim is legally entitled to payment. As such, an experienced probate litigation attorney can help in protecting the estate by ensuring that genuine clams are properly vetted.

If you have additional questions regarding the payment of debts through an estate, an experienced estate planning attorney can help.