The death of a loved one is an emotional time, the last thing anyone wants is added stress. Unfortunately, when that loved one leaves a significant amount of debt behind, the added stress of how it’s going to get paid and by whom is inevitable. Fortunately, the law addresses how an individual’s debts can be paid after they are deceased.
When a person dies, their assets are gathered into an estate. Assets owned jointly between the deceased and another person pass directly to the other person automatically. If there are liens on any of the deceased’s assets, they will remain, but no new liens can be placed on the assets for debts in the name of the deceased. Similarly, debt jointly in the name of the deceased and another party may continue to be collected from the other party. In community property states, all assets and debts are the joint property of both spouses and pass automatically from one to the other. Florida is not a community property state, but these are – Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
An executor is required to pay all debts from the assets in the estate before a beneficiary can receive anything. Property can be sold to create liquidity in order to accomplish this. If there are more debts than there are assets, the estate must sell of as many assets as possible to pay off the creditors. If there is no money in the estate, the creditor cannot collect anything. Often creditors will agree to discharge a debt upon receipt of a copy of a death certificate; this is particularly true of small, unsecured debts. Life insurance proceeds were never actually owned by the decedent and pass to a beneficiary without consequence to the estate. Proceeds of a retirement account may also be exempt from debts.
About Oakstone Law, PL
Oakstone Law PL was founded by Bob Kleinknecht. A member of the Florida Family Trust Company Subcommittee, the Estate Tax & Trust Planning (ETTP) Committee and the Real Property, Probate & Trust Law (RPPTL) Section of the Florida Bar, Kleinknecht has 15 years’ experience.
Prior to founding Oakstone law, he spent more than eight years serving as a personal, in-house estate, tax and charitable planning attorney for a Forbes 400 family in New York and Florida. Before that he was an estate planning and estate settlement attorney with prominent firms in Boston and Washington, D.C. after beginning his career with a boutique firm in Naples, Florida.
Licensed in Florida and Massachusetts, Kleinknecht has developed a practice model that eliminates billing by the hour and offers a streamlined, customized client process supported by technology, security and a personal approach.