Especially for relatives who may not have been completely forthcoming about their debts, working through what is and isn’t owed to creditors after death can be a difficult and time-consuming process.
Different states have different laws, but in most cases, wills must enter probate first to clear any unpaid debts, and in Mississippi, that process is the same.
What Debts Could Be Owed in Probate
If the estate has significant value and/or resources, creditors may come after outstanding debts such as mortgages or unpaid loans through the probate process. Other unpaid bills that creditors could come after include: money owed on lines of credit, condominium fees, certain taxes, storage fees, loans against life insurance policies and retirement accounts, and utility bills. The estate administrator or executor has to clear these debts and must use estate resources to do so. In most cases, only those that have been legally designated to deal with the estate can decide how assets should be used to resolve these debts. As you might expect, these debts need to be cleared before any inheritances can be issued.
Personal finance site The Balance suggests dividing expenses into two categories:
- Liabilities that will be ongoing during probate — these will be administrative expenses
- Liabilities that can be paid off in full after the probate estate is opened — these are the decedent’s final bills
Such expenses as the mortgage, condominium fees, property taxes, storage fees, and utility bills must be kept current until the estate closes. Where and how possible, the estate beneficiaries should pay these bills until the probate estate is opened.
If the estate is “insolvent”, as in not having enough resources to pay off debts, creditors may come after other members of the family to repay those debts, especially if debts were joint between the deceased and a living spouse or another living relative. A qualified estate attorney can review the estate’s assets in advance to determine if this could happen and be a vital resource should you receive formal queries from creditors.
Unpaid Debts Without A Will
Mississippi can direct your estate’s division if there isn’t a legal will present. The state divides up family members into four different groups based on the familial line with the first group (surviving spouse, children – including adopted, descendants of your children who died before you) as the “heirs at law”. Those heirs become your beneficiaries and each receives an equal share with the spouse not getting more than the children.
If an executor or administrator was never designated, the court will do so and add an attorney on as advisor if neither of the former are.
Creditors can still come after unpaid debts and the process would be similar based on the type of debt involved. It’s important to note that federal student loans and certain parent-first student loans are forgiven if the student or the parent who took out the loan dies. Private bank-issued student loans do not qualify for this.
Creating a valid estate and will can avoid many of the headaches and difficulties that come with asset disorganization after a death. Even something as simple as establishing beneficiaries on certain accounts can protect those funds and ensure they’re passed on to your heirs or those you deem. Having an appropriate succession document can also greatly reduce the amount of time creditors have to file claims against your estate. The Law Offices of Rusty Williard can help draft, formalize and execute the right plans for you and your family to ensure all unpaid debts are resolved quickly and efficiently. Call us today at (601) 824-9797 to speak with one of our qualified estate planning attorneys.