The probate process includes not only assessing the value of the estate for distribution to beneficiaries but also finalizing any outstanding debts owed by the deceased. Understanding the process for handling debts in probate helps to set clear expectations.
As an executor, you must account for and settle outstanding debts as part of the probate administration process.
Identify outstanding debts
The first step toward settling accounts is determining who the deceased owed money. Most people do not keep a list, so you need to review their bank statements for recent payments, check their files and even look through their email for details.
Notify creditors of the death
You have a legal obligation to notify creditors that the deceased has passed. Where possible, mail them a notification directly. You may also need to publish a notice of death as well. Your probate attorney can help you identify when and where to post public notices. Public notice provides an opportunity for other creditors to reach out for settlement.
Pay debts
Before you distribute anything from the estate to beneficiaries, settle creditor accounts. You can disburse the money left after paying outstanding debts according to the estate plan and the deceased’s wishes. Remember that assets placed in trust no longer belong to the estate. Those assets are ineligible for liquidation.
Remember that debt settlement takes priority over beneficiary disbursements when managing an estate. Make your best effort to identify and pay each outstanding account as part of your role as administrator, then provide the remaining assets to the beneficiaries as requested in the estate plan.
