In some cases, especially when someone passes away unexpectedly, they leave behind a significant amount of debt. For instance, they may have business loans or car loans. But even in situations where death is expected, there’s likely to be some level of debt from property taxes, income taxes, utilities, credit card bills and much more.
If the person passes away without paying off all of this debt and without making some other arrangement for it, such as establishing a fund to pay the debt, does that mean that their children will have to do it? Since the estate executor is supposed to take care of all of the affairs, are they suddenly obligated to pay this debt that they may not have even known existed until they read the will if the deceased named an adult child their executor?
The executor does not pay personally
The estate executor does have to pay off the debt for the estate. That is part of the job that they have. But they do not have to do this personally. They are not responsible in any sort of way that would have an impact on their own financial position — even if they are the child of the deceased.
Instead, they can pay off the debt using the money from the estate. Now, if they expected to inherit that money and they instead have to use it to pay the debts their parents left behind, it can feel like they are losing money in the situation. But there is no situation in which they would lose personal funds unless they co-signed a loan.
Complicated financial situations require complex estate plans. Make sure you know about all of your legal options.