Getting chosen as the executor of your parent’s estate is a big deal. This means they trust you to manage their affairs when they cannot. By accepting this role, you are taking on the responsibility of administering their estate.
After the initial wave of pride passes, you likely have questions. One of the most common involves the debt that may come with the estate. But first it helps to understand what it means to administer the estate.
How do I “administer” the estate?
The answer will vary depending on the estate. It can help to think of the assets moving through three different systems:
- Will. If your parents have a will, you may need to make sure it is probated, collect the assets passed under the will, and pay expenses.
- Trust. If your parents have created a trust, the assets may transfer into the trust. In that case, you would check for any assets that do not transfer into the trust and deal with those.
- Beneficiary designations. Certain assets transfer automatically, without your help or the guidance of a trust. These rely on beneficiary designations. The creator makes this designation at the time they establish the asset. This happens when the creator fills in the name or names of those they want the asset to transfer to in the event of their death. This is common with insurance policies and retirement accounts.
The estate’s assets will move through a combination or potentially all these systems.
What do I need to know about the estate’s debt?
It is important to define the debt of the estate. Common examples include a mortgage, car payment, medical bills, and credit card debt. Additional expenses to note include tax obligations, funeral expenses, and estate administration fees.
Do I have to pay those expenses?
Generally, not — but the estate does. As the executor, it is likely your responsibility to use the assets within the estate to settle these debts. It is highly unlikely that you will be personally liable for these debts. There are some exceptions, such as if you are listed on a joint credit card or on the mortgage. In those cases, you are likely liable for the debt.