When your parents pass away, they name you as the estate administrator. You review their estate planning documents, and you are in charge of the process of distributing their assets. You also inform beneficiaries about their passing, distribute copies of the will and do many other things of this nature.
As you go through the paperwork, you realize that your parents still had debt left when they passed away. Maybe it was a minor amount of debt, like property taxes or credit card payments. But it could also be much more significant, such as business loans or even student loans. If your parents owe money, is it your duty to pay off this debt as the executor of the estate?
How do you take care of an estate’s outstanding debt?
First and foremost, it probably is your responsibility to pay this debt — but only to the limits of what’s available in the estate. An estate executor has many different duties, and they do not all revolve around distributing assets. Paying the deceased’s remaining debts is one of the most common things that people have to do in this position.
However, do not assume that this means you are now liable for your parent’s debt. People are sometimes worried about this, especially when the amount of debt their parents have is more than they could even personally afford to pay. You will not have to worry about this and it should not affect your personal finances unless you cosigned a loan for them (which would then make the debt yours if they are deceased).
Instead, you pay off that debt by using the money that is within the estate. Ideally, your parents have already set up some sort of account or fund that you can use to pay back creditors. But even if not, as you take stock of the assets their estate has left, you can determine which ones will be used to take care of this debt. The remaining assets can then be distributed to heirs and beneficiaries as the will directs.
In some cases, this process can get complicated and you don’t want to overlook any important steps. Make sure you know what legal options and obligations you have as the administrator of the estate.