Paying Debt From Estate

• When an individual passes away, the debt that he accumulated while alive typically does not pass on to anyone else. To handle the debt, the executor uses the assets from the estate. If the estate has cash or other liquid assets, that money is used to pay off the outstanding debts. In many cases, the executor will have to sell any assets that were owned by the deceased to pay off the outstanding debts left behind.
  
  

Handling the Estate Properly

• When you are chosen as the executor, you will need to abide by the rules set forth by your state. To distribute the assets in the estate and pay the debts, you will work with the local probate court. The probate court will give you guidelines on which debts must be paid first and how to handle the estate in general. If you follow the rules set forth by the probate court, you should have no problems in handling the estate.
  
  

Personal Responsibility

• The only way that you would be held personally responsible for a deceased person's debt is if you break the rules of probate. For example, if you sell the house and do not pay off the mortgage, you could be held personally liable. If the estate has a large amount of liquid assets and you distribute them to the beneficiaries without paying off the debts, then you can be held personally responsible for the debt.
  
  

Considerations

• If you follow the rules of the probate court and pay the debts in the proper order, you will not be held responsible for the debt. Even if the estate does not have sufficient resources to pay off the debt, you will not have to come up with the money. You will inform the creditors of the insufficient funds and the creditors will simply write off the debt. To protect yourself from personal liability, you may also want to buy a probate bond before getting started. This way, if you make a mistake, the probate bond company will pay for any damages.