Fewer people today have the opportunity to pass away debt free. In most cases, an individual has at least one creditor. When it comes time to settle those accounts, you and other surviving family members may worry that they will be held legally responsible for the debts of their deceased loved one.
In general, the estate will be responsible for paying any outstanding debts of the decedent. The executor may sell assets of the estate to pay debts. When a creditor does not receive payment from that source, he or she may attempt to find someone else to pay the debt. Whether a debt owed by your loved one falls on you to pay depends on certain factors.
When would you become responsible for a debt?
Under the following circumstances, a creditor may look to you for payment:
- As a joint debtor on a mortgage or car loan, you remain responsible for the outstanding balance.
- If you inherit the home or vehicle and the estate cannot pay off the loan, the lender may look to you for payment.
- If you were a joint debtor on any other accounts such as credit cards, then you remain responsible for payment. As an authorized user only, you do not owe the debt.
- As the surviving spouse, you could be responsible for any outstanding debts since Texas is a community property state, which means that the state assumes you both incurred the debt.
- As a co-signer of any loan or other debt of the deceased, a creditor will look to you for payment.
If you do not fall into any of these categories, but a creditor contacts you for payment, you do not have to pay the debt. You can send a letter to the debt collector advising not to contact you again. When assets of the estate are not available to pay outstanding bills, debt collectors cannot seize proceeds of life insurance policies or retirement accounts since they pass to the beneficiary through operation of law and not through probate.
If a creditor is coming to you for payment of a debt that should have been covered by the estate, it may have been an error or omission on the part of the executor who failed to fulfill his or her duties. You may be able to go to the court to hold the executor personally responsible. If you are the executor, you may want to take steps to ensure that you do your best to pay off all of the debts of the estate prior to distributing any property.