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How debt is handled during estate administration and probate

Anyone chosen to be the executor of an estate may find out quickly it is not an easy job. The many duties of the executor include gathering the assets and securing them until Michigan estate administration and probate are complete. However, a less commonly known job of an executor is to deal with the debts of the departed. This can be a tedious and time-consuming task, and it is often the reason for the delay in the distribution of assets.

One of the first jobs of the executor is to notify any potential creditors of the death. To begin with, the executor may contact any known creditors and send them a copy of the death certificate. Obtaining a copy of the deceased's credit report will reveal many outstanding debts. Those debts will be paid during probate by using the assets of the estate, and typically, no distribution of assets can occur until this process is complete. In some cases, those assets may need to be sold to cover what is owed.

Some adult children may be shocked to learn that the state where their parents died will hold the children responsible for any medical bills or unpaid long-term care the estate cannot cover. On the other hand, any outstanding student loans are generally discharged at death unless they are Parent PLUS loans. The balance on a mortgage will likely become an issue for anyone who inherits the property. The estate is responsible for credit card balances, but those will likely be discharged if the assets are depleted. However, a lender may repossess a car if the balance cannot be paid off.

Of course, this is a general idea of the way debts are handled during estate administration and probate. Each state is different, and individual lenders may have different policies. Speaking with a Michigan attorney is the best way to understand the laws pertaining to a specific situation.

Source: khou.com, "What happens to debt when we die?", Sarah Li Cain, Accessed on Oct. 7, 2017

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