Most people want to leave assets that they’ve worked hard to accumulate during their life to their loved ones and other beneficiaries like non-profit organizations when they die. Careful estate planning allows people to determine what happens to those assets.
What if – like many people – you pass away with more debts than assets? Will they eat up your estate? Worse yet, will your loved ones have to repay your debts with their own money?
What does Pennsylvania law say?
Typically, when a person dies, their estate is responsible for paying any outstanding debts. The executor of the estate will need to pay your creditors before they can disburse any assets that remain. Pennsylvania probate law lists the types of debts that must be paid from an estate first. These include things like medical and funeral expenses as well as rent or mortgage payments for the deceased person’s home.
Co-signers can be left with debt
If your debts are larger than the value of your estate, some debts will simply go unpaid. There are, however, some cases where a surviving loved one or other person may have an obligation to repay the debt.
For example, if you are the co-signer on a loan or credit card with the deceased person, you’ll likely be responsible for the outstanding balance. If the executor who is also a beneficiary didn’t follow the law in paying creditors, they might also have some responsibility for debts.
Estate planning isn’t just about determining who will get your assets. It’s also a good time to look at your loans and other outstanding financial obligations. Your executor should be aware of those so that they can deal with them as efficiently as possible. Any co-signers, including your spouse, should also be aware of their potential obligations.