Settling the estate of someone else or serving as their executor is a difficult task that requires careful planning, documentation and execution. One of the tasks that you will have to complete in your role as executor is the repayment of outstanding debts held by the deceased party.
As you begin to do an in-depth accounting of their financial circumstances, you may find yourself wondering which debts must be repaid before you can distribute assets to the heirs or beneficiaries of the estate. In some cases, you might feel tempted to ignore certain debts and start distributing physical possessions to the family members of the deceased before the estate is settled.
Making the right decisions and documenting your actions during the estate administration process, including the repayment of outstanding debts, can help protect you from potential consequences as an executor.
All debts must have to be repaid, but some receive priority
In order for wealth to pass to one generation from the previous one, that wealth will have to be fairly earned and properly taxed. The executor of an estate must make sure that they handle all outstanding accounts held by the deceased, ranging from medical bills and credit card balances to outstanding utility bills and income taxes.
If you as the executor fail to repay even an unsecured that like a credit card while handling the estate and distribute assets to beneficiaries, it’s possible that a creditor could bring civil action against you and hold you personally accountable for that oversight. Even if you have to liquidate assets to do so, you should make repaying all debts in a timely manner one of your first priorities during estate administration.