When a loved one dies, you may be faced with the task of gathering their assets, determining what debts need to be paid and giving notice to the creditors. Valid debts are to be paid from the estate before the remaining assets can be distributed to the heirs and beneficiaries. Minnesota law sets a priority for which debts are to be paid from an estate--called Classification of Claims. If the estate assets are exhausted before all valid debts are paid, the estate is declared insolvent.
If the estate becomes
insolvent, and there are debts remaining, you may have a question on your mind:
Can the decedent's creditors hold me financially responsible?
In the case of
unsecured debts, such as credit cards and utility bills that are in the
decedent's name only, the answer is "no." However, if you were a
joint owner of an account or a co-signer on a loan with the decedent, then yes,
you would assume financial responsibility for the debt.
Nevertheless, unscrupulous
collection agencies will sometimes pursue collection after death and may
attempt to claim that you are responsible for a decedent's debt. They may hound you with calls and use
aggressive tactics to harass or intimidate you. If you encounter such tactics,
the Minnesota Attorney General's Office may be
able to help.
In the case of secured debt, such as a home mortgage of car loan, it must be repaid or the lender can repossess the asset. If there are assets subject to secured debt, it is the responsibility of the personal representative or probate administrator to manage those assets. Until the property is sold, it is necessary to continue making payments to preserve the equity.
Since Minnesota law provides a priority of debts to be paid from the estate, it is important to first pay the high-priority debts, such as funeral expenses, taxes, and legal fees associated with the estate administration. Don't pay the lower-ranking debts at first, such as credit cards and other unsecured debt. Those can be paid after the high-priority debts, if there are still sufficient funds in the estate.
If the estate assets run dry before all the debts are paid, the personal representative must declare the estate insolvent. If you are an heir or beneficiary named in the Will, unfortunately, you won't receive a share of assets from the estate.