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Settling an estate’s debts

| Jun 10, 2019 | Estate Planning |

Some in Saint Charles might mistakenly believe that once one dies, all of their debts are resolved. Yet that is not the case. Were a decedent still alive, the funds used to pay their debts would be taken from their personal assets. Upon their death, those assets become their estate. Thus, any debts that are owed now must be paid from the estate. As one’s executor or personal representative is tasked with managing their estate, the job of allocating estate assets to pay off their debts falls to that party. Since msn.com reports that the average American has $61,000 of debt when they die, those asked to serve in the aforementioned role should be familiar with their debt resolution options. 

An important point for personal representatives to remember is that while their role is to settle the estate’s debts, they themselves do not assume liability for them. Therefore, a creditor can only collect that which is available from a debtor’s estate. 

In a perfect world, decedents would leave behind sufficient liquid assets to repay all of their debts, making their personal representatives’ jobs much easier. Yet in many cases, estate property must be sold in order to resolve debts. Some may think that they can get out of paying for assets against which a creditor has a claim by gifting them to a beneficiary (e.g., one leaves a car that they still owe money on to a relative). However, according to Section 473.267 of Missouri’s Probate Code, an executor or personal representative is entitled to recover that property in order to settle any claim against it. In the aforementioned example, the executor would recover the vehicle, settle the claim against it (likely by selling it) and then return any profit generated from the sale to the beneficiary.