Your parents recently died and you were named the executor of their will. (If there is no valid will, this is called the “administrator.”) It simply means that you’re the one that handles the estate and takes care of things after your parents have died. As everything goes through probate and the will (or the law where there is no will) is followed, it’s your job to make this goes as required by law.
What you quickly find is that your parents died with more debt than you’d expected. Maybe they still had outstanding business loans or they still owed a significant amount of money on their mortgage. Perhaps they just had much more credit card debt than you ever imagined. Or maybe they didn’t file their taxes for the last 5 years of their lives.
What you’re wondering is if you are now going to be responsible for all of this debt. You are the estate executor, after all, so you’re in charge. Does that also mean that you have to pay the debt that your parents took out when they were still alive?
You have to pay the debt out of the estate
You do have to handle this debt in some way, and that’s one of the jobs of the executor. But you don’t have to do it out of your personal finances. You simply take any assets that are left in the estate and use them to pay off the debts to the best of your ability.
This may mean that you inherit less than you expected. Maybe your parents set aside $100,000 for you and your siblings, but they have $70,000 in debt that wasn’t considered. You may need to pay off some or all of that debt before you can begin distributing the money, meaning you’re not going to get nearly as much as you would have otherwise. But you don’t have to use your personal funds to pay off debts that you didn’t take out.
If this process gets complicated, be sure you understand your legal options thoroughly.
Handling creditors in the probate process
There is a process for creditors to file creditors’ claims during the probate process. The executor must notify all “reasonably ascertainable” creditors and notify them of the probate process. The creditors then have a limited time to file their creditor’s claim with the court and the executor. If a creditor is notified and they miss the deadline, the executor does not have to pay their creditor’s claim. If an executor reviews a creditor’s claim and feels that not all the debt is justified, the executor can reject all or part of the creditor’s claim. It would then be up to the creditor to petition the court for their claim to be paid.
Many times creditors will take a reduced amount of debt repayment. This is where an experienced probate attorney can be helpful.
It is the executor’s responsibility to manage the estate’s debt, but it is not the executor’s responsibility to pay that debt out of pocket — even if there is less money in the estate than there is debt.