Nevada residents with an interest in the estate planning process may wish to know more information about what happens to a person’s debts when they pass away. Depending on the type of debt and who is involved, the answer may be complicated.
When a person dies with outstanding debts, these are usually the sole responsibility of their estate. If the estate does not contain enough assets to cover the debt, then the debt cannot be paid. As part of the person’s estate plan, a will includes the name of the person named as the executor. The executor is tasked with administering the deceased person’s estate, including the payment of outstanding debts. When an executor is not named in the will or there is no will, the state may appoint someone to serve as executor, or others may have the authority to act as executor according to state law.
There are some situations where another person may be liable for the debt of someone who has passed away. For instance, if that person has consigned on a loan, they may still be responsible for paying that debt. A spouse may be responsible for debts that are considered community property and for some liabilities they are required by law to pay, such as outstanding health care costs. Lastly, when an executor who is responsible for paying the debts fails to do so, they may be liable for those debts.
Understanding the complex estate planning process can be difficult without the assistance of an attorney. An attorney may be able to assess a person’s finances and determine the best way to protect their assets through a comprehensive estate plan. The attorney may also be able to assist with the estate administration process.
Source: Federal Trade Commission, “Debts and Deceased Relatives,” July 1, 2011