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When probate includes a loved one’s debt

On Behalf of | Nov 6, 2021 | Probate

If a will has designated you executor or a Texas probate judge has appointed you administrator of a loved one’s estate, you may be feeling overwhelmed by your responsibilities. Not only must you gather and protect the assets in the estate, but you must also deal with the heirs who may be clamoring for their inheritance. 

What they may not understand is that the estate is responsible for satisfying any outstanding debts your loved one’s creditors may demand. Even if probate is not officially opened for the estate, you can begin to streamline the process for dealing with your loved one’s creditors. 

Sorting through the debt 

Your first step is to list all of your loved one’s debts. Unfortunately, this might not be easy. Not everyone keeps careful ledgers and systematically organizes their bills. You will probably have to search through piles of mail, bank statements and online accounts to get an accurate listing of what your loved one may owe. Some of the most common debts to deal with during probate include the following: 

  • Credit cards 
  • Mortgage or rent payments 
  • Personal loans 
  • Auto loans 
  • Loans against insurance policies or retirement accounts 

You may also want to continue paying utility bills and insurance premiums until the conclusion of probate so the house does not stand empty and unprotected, which could lower its value or invite vandals. Your loved one could also have storage space for which you will want to continue paying rent until the items can be removed and distributed. Taxes are a priority debt, so it is likely you will be completing your loved one’s final tax returns and potentially filing the correct forms for federal estate taxes. 

Inheriting a mortgage 

While it is possible that you will have to liquidate some of the estate’s assets to repay outstanding debt, you may also be able to negotiate with some of the creditors. However, a mortgage or auto loan is something the heirs will have to decide on. It is possible a beneficiary will not want to inherit a house with a mortgage or a vehicle with payments due. Any who decide to keep such assets will have to refinance the loans. 

Dealing with someone else’s creditors during probate can be tricky. It is not always easy to know if a creditor’s claim is valid or the most appropriate steps to take to satisfy an outstanding debt. Fortunately, skilled probate attorneys deal with these issues every day and are a valuable resource for someone charged with handling a loved one’s probate matters. 

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