Figure out which debts you have to pay and in which order

Which debts the estate needs to pay, and in which order, depend on the state and whether the estate has more money than is owed or not. You are likely not personally liable.

Here are the rules:

If the deceased has more money than debts, the estate is responsible for paying all debts. Beneficiaries inherit whatever is left after all debts are paid

Example:

  • Accounts:

    • $100,000 in bank accounts and house value

    • $50,000 in credit cards and medical debt

  • What you need to do:

    • Pay the $50,000 in credit cards and medical debt from the estate accounts

    • Distribute the remaining $50,000 to the beneficiaries

If the deceased has less money than debts, the estate is responsible for paying debts with the money in the estate in the order of priority determined by the state.

  • If you are in this situation, you should consult a lawyer, because failure to pay the estate expenses in the right order could lead to the executor being liable. You can find a lawyer by clicking here.

  • The priority for debts in most states is:

  1. Medical bills and Medicaid estate recovery

  2. Funeral expenses

  3. Federal and State Taxes

  4. Other creditors (credit cards, cable companies, etc.)

As an heir, you are usually NOT OBLIGATED TO PAY debts beyond what are covered by the estate, unless:

  • You cosigned on the debt

  • You are the spouse of the deceased and live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin. Contact an attorney if this is the situation, because there may be obligations for debts. To find an attorney, click here.

  • You claimed the deceased as a dependent

Creditors may still try to collect the debt from you, even if you aren’t obligated to pay.

Example:

  • Accounts:

    • $50,000 in estate bank accounts

    • $40,000 in medical debt

    • $10,000 in funeral debts

    • $5,000 in credit card debt

  • What you need to do:

    • Pay the $40,000 of medical debt and $10,000 of funeral debt from estate bank accounts

    • There is now $0 left in the estate

    • In most cases, you can ignore the credit card bills and do not have to pay.

    • In the cases listed above, you may have to pay the credit card bills from your own money.

Once you have a good idea of the amount of debt the estate is able to cover, proceed to the closing of credit cards.

  1. First, find all of the deceased’s credit cards:

    • You can usually do this by going through the deceased’s wallet/purse

    • Additionally, when you get the final credit reports back, you can double-check that you found them all. If you’re not sure how to do that, check out the credit report instructions.

  2. Call the credit card customer service lines. You can find the phone number on the back of each card. If you can’t find it, here are the numbers for common credit cards:

    • American Express: 1-800-528-4800

    • Barclaycard: 1-302-622-8990

    • Capital One: 1-800-955-7070

    • Chase: 1-800-432-3117

    • Citi Credit Cards: 1-800-347-4934

    • Discover Card: 1-800-347-2683

  3. Give the deceased’s name, birthday, Social Security number, and tell them why you are canceling the card

    • They will ask you to pay any money that is owed on the card

    • Make sure that you are okay with canceling the subscriptions that are associated with that card. If not, make sure to transfer them to a different account.

finance, legal, settling affairsJennifer Goodfinance, legal, financial and propertyComment