Probate, in its most basic definition, is the legal procedure of resolving the estate of someone who has died.
The probate court decides how the deceased’s assets should be distributed and ensures that creditors are paid as much as possible out of the estate before the remaining assets are passed on to beneficiaries.
1) Heirs are not responsible for debts
During the process of probate, heirs are not responsible for paying the debts of their loved one. It is up to the executor of the estate to deal with all obligations before distributing assets.
This can include setting up a payment plan with creditors or filing for bankruptcy on behalf of your deceased loved one’s estate. The executor will also need to file final tax returns in order to settle taxes that are owed.
If you have any questions about what you might be inheriting from your loved one, it may be helpful to consult an attorney who specializes in wills and estates. They will know what steps need to be taken and how best to manage your inheritance.
For example, if you’re inheriting property, they’ll likely recommend that you contact a realtor to help find tenants. You’ll also want to figure out when the mortgage needs to be paid (if applicable) as well as utility bills and other expenses that might come due during probate proceedings.
2) Debts must be paid before any assets can be distributed
When someone dies, the estate may not have enough money to pay all of the debts. The debts must be paid before any assets can be distributed to the heirs.
If there are not enough assets available to pay the debts and provide an inheritance, then creditors will need to wait until another person dies.
Assets that would ordinarily go to the deceased’s family members instead go to the creditors. It is possible for a creditor to sue the estate in order to recoup their losses or prevent other people from benefiting from them.
Many times, this means the court will appoint a receiver who manages the affairs of the deceased’s estate. Creditors are usually notified when receivership proceedings begin and they may attend hearings on behalf of their interests.
Probate law dictates how much time creditors have to file a claim against the deceased’s estate. In most cases, it is less than two years.
After filing their claim with the court, creditors typically receive payments from the executor (the person responsible for managing the distribution of assets) once per month.
3) The executor is responsible for paying debts
The executor is responsible for making sure the estate’s debts are paid. The executor may be a creditor who has an interest in the estate.
If there is no executor, the court will appoint one. Creditors must file a proof of claim with the court or give written notice to the executor if they want their debt paid from the estate.
Probate assets can only be used to pay creditors’ claims. A request for payment on behalf of a minor child should be filed with the Court and approved by the Probate Court before paying any expense incurred on behalf of that child.
Expenses paid without Court approval may result in civil liability to the person who made such payment.
In many instances, it is better for beneficiaries to wait until after probate proceedings have concluded and distributions have been made before asking for a distribution of assets from an estate.
Is example, it is common practice that taxes owed by the deceased person are deducted out of payments to beneficiaries.
4) Creditors have a limited time to file a claim
When someone dies, their heirs are responsible for paying the deceased’s debts. Creditors have a limited time to file a claim with the courts and receive payment before assets are distributed.
A creditor can file a petition in probate court up until 6 months after death or up until the first meeting of creditors. If this is not done, then the creditor will not be able to recover any money from the estate.
If an individual files as executor or personal representative of an estate they need to be aware that they will be personally liable for any claims against it if they cannot satisfy them by distributing assets.
It is also important to know what constitutes a valid debt and make sure there is enough money available in the estate.
One way to protect oneself from this type of liability is by getting professional advice about how much needs to be set aside for taxes and other debts.
It can also be helpful to prepare an inventory of all assets so the person knows what may or may not go into distribution at some point.
5) Unsecured debts are paid first
When a person dies, the executor of their estate must take care of all the debts that they owe. In most cases, unsecured debts will be paid first. Unsecured debt is any debt that isn’t secured by property or some other asset.
These types of debts are usually credit cards, medical bills, utility bills and personal loans. Secured debt are taken care of after the unsecured debts have been resolved: Secured debt includes things like mortgages, car payments and taxes.
Once these obligations have been taken care of, then inheritance is distributed. What’s left over goes to beneficiaries: The executor will distribute what’s left over among beneficiaries as spelled out in the deceased’s last will and testament or as determined by law if there was no will created.
6) Secured debts are paid next
Debts that are secured, such as a mortgage or car payments, have priority over debts that are unsecured. Secured debts must be paid in full before any other bills come due.
For example, if the person owed money had $10,000 of secured debt and $5,000 of unsecured debt, the creditor would be repaid first by the estate for $10,000 and then the balance of $5,000 would be divided among all creditors according to their claims against the estate.