Debt is part of the modern economy. Most young adults can’t obtain a college degree without taking on debt. Many households rely on revolving lines of credit to cover unexpected expenses. Individuals who need emergency medical care may end up with staggering levels of debt if they don’t have insurance or seek treatment while out of their insurance network.
Debts can potentially follow someone for the rest of their life unless they pay them in full or file for bankruptcy. Debts can even persist after the death of an individual. Personal debts tend to have a profound impact on probate proceedings. Both beneficiaries expecting to inherit from an estate and personal representatives administering an estate need to understand how debts affect the probate process.
Creditor claims lengthen the probate timeline
Those owed money by the decedent must have an opportunity to make claims in probate court. They should receive communication from the personal representative or may find published notice in a local newspaper. After that, they must submit a written request for repayment to the probate courts to obtain payments for valid debts using estate resources. Creditors can have up to four months after published notice to make claims, which may mean it takes substantially longer to complete the estate administration process.
Debts can reduce the decedent’s legacy
Generally speaking, valid debts take precedence over inheritance rights during probate proceedings. Creditors ranging from hospitals to credit card companies should receive payment using estate resources before beneficiaries receive their inheritances. In some cases, debts can be significant enough to completely consume the assets that remain in an individual’s estate. Other times, beneficiaries and heirs may only receive a portion of what the decedent owned because of the debts they owed.
Debts can create liability for representatives
The personal representative administering the estate must be careful to fully follow all requisite state statutes. Failing to do so can expose them to personal liability. Creditors could take them to court and hold them personally accountable for improperly distributing resources without first paying them using estate assets.
Learning more about what to expect during probate proceedings can help those hoping to inherit from an estate and those administering one. Debts are one of several responsibilities that can diminish the value of an estate and make probate proceedings more complex if they aren’t addressed appropriately.