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What Happens to Debt After Death?

by | Aug 30, 2021 | Articles, Estate Planning

When a loved one passes, so many things can happen at once. It falls to family or close friends to communicate the news, arrange a funeral, cover hospital bills, etc. Unfortunately, none of these tasks pause as we work our way through the process of grieving.

Someone will also be expected to go through the loved one’s possessions, including their Will and Estate Plan, and general finances. During this process, it isn’t uncommon for remaining loved ones to uncover debts accumulated by the deceased. Discovering unpaid debt can be alarming, especially if the number is high. Panic sets in and questions inevitably come up. Will those debts be forgiven? More importantly, however, who is responsible for these unpaid debts?

Here’s a quick guide for you, created by the probate lawyers of Cherewka Law.

What Debts are Forgiven at Death?

Unfortunately, a person’s debt does not disappear after their passing. A person’s estate is responsible for paying any unpaid debts to the extent the estate has funds available to pay those debts.

The finances for the estate will are handled by a personal representative, either an executor or administrator, who is responsible for paying all incurred debt, including the medical bills. Neither the executor nor the family members or beneficiaries will be personally responsible for the debts, however, the executor can be held personally responsible if the estate is managed incorrectly or debts or expenses are not handled properly.

Who is Responsible for Debt After Death?

Generally speaking, if the funds in the estate will not cover all of the outstanding debts, the estate must pay those debts according to their priority, as established by Pennsylvania state law.  The priority of debts are paid as follows:

  1. The Cost of Administration
  2. The Family exemption
  3. The cost of the decedent’s funeral and burial, medical expenses within six months of the date of death.
  4. The cost of a grave maker
  5. Rents of occupancy of the decedent’s residence for six months immediately prior to death.
    • – Claims by the Commonwealth and the political subdivisions of the Commonwealth
  6. All other claims.

There are some limited circumstances when another individual can be obligated to repay a debt.  Those circumstances would include:

  • Joint owners or account holders

Co-signers or personal guarantors of the loan

What Happens if a Notice or Demand for Your Loved One’s Debt?

If you’ve been told you are responsible for a deceased loved one’s debt, it’s important to first consult a probate or estate lawyer before making any payments. Some things are more absolute than others. If you are a loan co-signer or a joint account holder, it is likely that you will be the responsible party. However, getting legal advice from an experienced estate attorney ensures that you avoid specific situations that can hurt your financial standing.

Debt After Death: The Bottom Line

To spare your loved ones from unnecessary grief and stress, make sure to keep a list of all your outstanding obligations. If your finances are in an organized order when you pass, at least your loved ones will not have to spend extra time and energy on a discovery mission.

If you’re on the hunt for the best probate lawyer in Wormleysburg, PA, Cherewka Law has you covered. We provide our clients in Harrisburg, Hershey and throughout the West Shore area with personalized estate planning and estate administration services.

Book a consultation today.

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