Someone who amasses significant debt faces obligations to repay the creditors. Any failure to do so might result in a ruined credit score and a lawsuit. Family members may assume the debts become uncollectible when the debtor passes away. However, that is not always the case under New York law, as settling an estate’s debt would likely be necessary to close probate on a will.
Debts and probate
Family members, particularly adult children, might worry that they will become responsible for a deceased parent’s credit card or personal loan debts. That’s not an accurate assessment since a parent’s personal obligations do not transfer to the personal credit history of a child. However, the debt remains part of the estate and when the estate enters probate, expect the court to require payments to creditors based on available estate assets. Granted, some estates are insolvent, which means there are no assets to pay debts.
If a child co-signed any loans or shared a credit card account with a parent, the child would be responsible for any debts the parent incurred. Executors who distribute assets without paying creditors could find the creditors filing lawsuits to recover what the estate owes them. There may be other scenarios where addressing debts becomes a spouse’s or child’s responsibility under state law.
Estate planning and debt payments
Anyone preparing an estate plan should consider debt matters, including loans, taxes, etc. Creating a detailed list of creditors and balances owed may help an executor address the obligations. Providing usernames and passwords to such accounts offers easier access to those authorized to view the information.
Closing credit accounts is another essential step of the probate process. So is informing all creditors of the debtor’s passing.