10 Things You Need to Know About Debts After Death, Part 2 of 2
When a loved one dies, do their debts die with them? The answer is, it depends. Following are the second 5 of 10 things you need to know about debts after the death of a loved one:
Wait to distribute assets. No assets from the estate should be distributed until all debts are settled. If assets are distributed and there is not enough left in the estate to handle outstanding debts, the heirs could become responsible for the debts.
Ask for options. If you are a surviving spouse and a joint account holder on a decedent's credit card that you still need to use to pay bills, you may be able to work something out with the creditor. Ask for options.
Know community property state rules. As noted above, in a community property state like California, a surviving spouse can be liable for the debts incurred by his or her spouse, even if they were not aware of those debts. You should consult with a probate attorney to determine exactly what your responsibilities to pay a deceased spouse's debts according to California law.
What happens if an estate can't pay debts? If an estate does not have enough assets to pay off debts, the lenders generally lose. If the debt is secured - a mortgage or a car loan - then heirs may have the opportunity to work with the lenders to either pay off or assume the mortgage or car loan if they want to keep the house or car. If the debt is unsecured - i.e., credit card debt - the creditor will generally be forced to write off the debt (unless, as noted, the decedent was married in a community property state where the spouse may then be liable).
Work with a probate attorney. When it comes to questions about debts after death, the law can be complicated in community property states like California. It is best to contact a probate attorney for help.
The Flanigan Law Group provides Southern California residents with personal attention for estate planning, administration and litigation legal services. When disputes between families, arise, they are very successful in resolving legal estate issues quickly and efficiently while preserving financial and emotional resources. Contact the Flanigan Law Group at 949-450-0041.