Ever felt like your bills have a life of their own? It’s not so far-fetched a thought, since upon death, they keep coming—and need to be paid. Here are some tips for settling affairs.
An Ounce of Prevention
Of course our loved ones will be distraught when we die. AARP offers this guidance for sparing them from adding headache to the heartache: “keep a list of all your accounts, creditors and account numbers, and let an appropriate person know where to find it.” Experts also suggest providing the relevant passwords. Of course you should never email a list like this to anyone—remember: cyber threats!
As you know, having a will or trust is also essential. That way your intentions will be clear and your designated executor will be prepared to administer your affairs. Make sure your executor knows that paying the bills are part of the responsibilities they will undertake—and how to access the needed information.
A person’s financial obligations are not automatically forgiven once they’ve died. According to the Consumer Financial Protection Bureau, in most cases, any unpaid debts are covered by the person’s estate — the total assets owned at death. If the individual appointed a personal representative, executor or administrator, he or she is responsible for paying any debts from the estate, including medical debt.
Creditors have their rights, too, says Martin Hewitt, a lawyer in New York City who’s also a member of the American Bar Association’s Commission on Law and Aging: “They can file claims in probate [the process of establishing the validity of a will], and can sue heirs who may try to bypass the probate process.”
Debts must be settled before heirs receive any money. If there is no will, a judge will decide how the assets should be distributed, and will appoint an administrator to carry out those decisions.
Probate Court and Administrator Bonds Explained
The administrator is tasked with paying bills to creditors and outstanding tax liabilities to the government and distributing the assets of the estate to beneficiaries who are deemed entitled under the law.
Frequently probate courts require the appointed administrator to obtain an administrator bond, prior to settling the affairs of the deceased. Sometimes also referred to as a probate bond, administrator bonds are a type of fiduciary bond—they guarantee the faithful performance of the administrator in accordance with applicable state laws.
When courts order fiduciary bonds, it is important to obtain them expediently so as not to delay probate proceedings. It is easy to obtain an administrator or probate bond instantly and affordably from leading, national provider, Colonial Surety Company. Uniquely, Colonial offers direct, digital, administrator bonds. Just get a quote online, fill out your information, and enter your payment method. Print or e-file the bond right from your home or office—even while at court. With Colonial, it’s that simple.
State Law Matters
State laws governing intestate succession guide the distribution of assets to beneficiaries if there is no will, or if the will is deemed invalid. States also have laws regarding the settlement of the debts of the deceased. AARP explains:
State law may require a spouse to pay certain debts. It may, for example, require the estate executor or administrator to pay an outstanding bill out of property that was jointly owned by the surviving and deceased spouse.
Also, in community property states — Alaska (if a special agreement is signed), Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin — the surviving spouse may be required to use community property to pay debts of a deceased spouse. If there was no joint account, cosigner or other exception, the estate of the deceased person owes the debt.
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