By: Barry E. Haimo, Esq.
May 19, 2015
Do I Have to Pay a Debt to a Deceased Person?
HAIMO: When a person dies, anyone who owes them money will be referred to as a creditor of the estate. So yes, you will still owe not them the money, but their estate the money.
If you owe money to someone and they pass away, you are not necessarily relieved of that debt. If there is an existing contract of your debt, you are still legally obligated to pay the money back.
It should be noted, however, that if the debt is not a matter of record, paying it back to the estate is more of a personal decision than a legal one. For the sake of argument, we’re going assume that the debt is a matter of record and explain how the process works.
Creditors and the Probate Process
If you have a legal obligation to repay a debt, that debt does not die alongside the creditor. You are still beholden to the terms of your debt, and failing to pay the money back to the estate can lead to legal consequences—just as it would if the deceased person was still alive.
Part of the probate process for the deceased person’s estate includes settling his or her creditor accounts. This includes the debt owed by the decedent and debts owed to the decedent.
The debt you owe is considered an asset of the decedent’s estate. These assets will first go to paying the debts of the estate and then be distributed to heirs in accordance with the terms of the will, or the laws of intestate succession if there is no will.
The estate is represented by the personal representative (also known as an executor). This person is responsible for gathering and making an inventory of the deceased person’s assets—including the debt you owe to the estate.
It is in your best interests to settle the debt yourself by paying it back to the personal representative. If you do not pay the money back, the personal representative can make a demand on you and sue you in the name of the estate in order to collect the debt.
In some cases, the heirs of the estate may not be interested in collecting on the estate—particularly if the deceased person died with more debt than the value of the assets in the estate. In other cases, you may be able to come to a settlement with the beneficiaries and/or other creditors of the estate.
If you come to an agreement such as this, you should make sure the decedent’s heirs indemnify you up to the amount of money that you owe to the estate. Otherwise, other claims brought against the estate could still hold you responsible for the debt. This might include other creditors of the decedent’s, heirs that you are not aware of, or tax creditors.
Not sure whether or not you should pay or how exactly to go about it? Contact us today to set up a consultation.
Barry E. Haimo, Esq.
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