When a member of your family dies, the deceased often leaves debts behind. Who is responsible for these debts can become quite murky. Prior to declining payments or making payments to any debts that belonged to a now-deceased family member, you must be sure of your legal rights. However, determining responsibility and making payments on debts can be hashed out.
Things You'll Need
- Copies of all debt statements
- Copies of original loan contracts for debts
- Copies of ownership documents and appraisals for assets in estate
Settling Estate Debts
Determine the owners of ALL debts in an estate, prior to taking any action. Legally, so long as you are not on any loan agreement as a co-signer, vested party or authorized user (this one can be tricky; make sure to speak with an attorney about the responsibility of authorized users), you are not responsible for paying such debts out of your pocket.
Add up the balances of all debts that do not belong to you. Make sure to get payoff statements from all creditors. When requesting a payoff, ensure the balance includes interest with a good-through date and a per diem.
Add up the total value of all assets in the estate. This will include all investments, investment properties, holdings in stocks and mutual funds, balances in bank accounts, appraisals on homes and any collectibles or valuable household items (like antiques).
Compare the total outstanding balance of all debts owed and the value of the assets. If the assets total outweighs the debts, liquidate the holdings to pay off all debts. If you do not do this, the deceased's party's creditors will do it for you--with the help of the courts.
Pay all the debts in full. Get payment addresses for all creditors and send payoff checks by certified mail, with copies of the payoff statements. Confirm these payments are posted once received by creditors.
Pay the largest debts tied to the estate if there aren't enough funds from the assets to cover all debts owed. You will not be on the hook for the remaining debts--so long as you are not a co-signer.
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