Even if you don’t have significant or overwhelming debt, odds are that you are going to still owe something when you pass away. Most people will owe property taxes, income taxes, credit card payments or even mortgage payments. They’re just things that are part of your annual financial picture, that you can usually take care of over time, but they may be left unpaid.
As you do your estate planning, who needs to pay these debts? You have to look beyond just your assets and think about what you owe, as well. Whose responsibility is this?
The executor pays out of your estate
Technically, the executor of the estate is the one who has the responsibility to take care of this. As the administrator, it’s their job to go through and distribute assets, pay off debts and take other action in accordance with your estate plan.
This does not mean that the administrator is on the hook for any of that money personally. For instance, if your debt level is greater than the assets left in your estate, the administrator just pays what they can from the estate. The other debt will not be paid back. The administrator doesn’t have to pay it personally, but just uses the assets that you leave them.
What this means is that a lot of people set aside funds during the estate planning process that are specifically earmarked to pay off taxes and debts. This way, you know that it’s quick and easy for your heirs to take care of everything.
If you’d like to learn more about how to do this or any other part of your estate planning process, take the time to carefully look into the potential legal steps that have to be taken to ensure your plans are properly followed.