If a friend or family member has recently died, you may be dealing with outstanding debts owed by that person. You may be wondering who will have to pay these debts, or where the money will come from. The fact of the matter is this: there are two things you should know about when it comes to outstanding debts owed by someone who has died.
The first thing you’ll need to know is whether or not the estate of the decedent (i.e., the person who died) was solvent or insolvent. An estate consists of all the personal property owned by someone that does not change ownership outside of probate upon that person’s death. What is the difference between a solvent and insolvent estate? A solvent estate is one that has enough assets to satisfy any outstanding debts, yet still have enough assets left over for the decedent’s heirs or the people named in their will. An insolvent estate, on the other hand, does not have enough assets to satisfy the outstanding debts, let alone to pass to the decedent’s heirs or devisees (i.e., people named in the will to receive property). In order to determine the estate’s solvency the administrator will need to conduct a thorough inventory and valuation of all the assets, as well as calculate the outstanding debts, and then compare the two tallies.
The second thing you’ll need to know is that only the estate will be responsible for paying the outstanding debts. Heirs or devisees may not receive anything from the estate, but they won’t be required to pay any unsatisfied debt. If you have any questions regarding the probate process or which debts should be paid, please call our office at 336.547.9999.