Dealing with the death of a loved one can be difficult enough without the additional responsibility of settling the deceased’s estate, particularly when it comes to bills, taxes and other outstanding debt.
Legal requirements regarding a decedent’s expenses can vary widely state by state. If you are handling a loved one’s estate, be sure to consult with an attorney. Here are some other important factors to keep in mind.
The deceased’s estate will be liable for expenses.
The executor will use estate assets to pay outstanding debts including federal, state and local income taxes (if applicable). The state generally determines the order in which the executor must pay these debts.
Funeral expenses are a priority obligation – and are reimbursable.
The estate can reimburse those who pay out of pocket to help cover “reasonable” funeral expenses, assuming the estate has the assets to cover the costs. Funeral costs usually have priority status over other creditors, but the rules can vary from state to state.
Beware of debt collectors.
For the most part, a deceased person’s debts do not transfer to a spouse, child or other heir or beneficiary. However, that may not prevent collection agencies from trying to reach family members to seek recovery of the decedent’s bills. For example, unless you co-signed a loan or are a joint holder to a default account (such as a credit card account) with the deceased, you are likely not liable for the debt. Surviving spouses should consult with an attorney, particularly if they live in one of the nine community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin). If collection agencies contact you consistently, refer them to your attorney or to the executor of the estate. If the agencies continue to call, you can file a complaint with the Federal Trade Commission.
Some assets are exempt from creditors.
Generally, estates do not include assets held in irrevocable trusts. Consult with an attorney to determine whether there are other assets that maybe outside of the decedent’s estate.
This communication is not intended to be legal or tax advice and should not be treated as such. Each individual’s situation is different.
Source: Wealth Management Systems
Fifth Third Bank does not provide tax or legal advice. Please consult your tax adviser or attorney before making any decisions or taking any action based on this information. This information is provided for educational purposes only and does not constitute the rendering of tax or legal advice.
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