Many people associate estate administration with distributing someone’s property after they pass away. While this is part of estate administration, the decedent’s debts must be addressed, as well.
Unfortunately, debts do not go away, even if the debtor dies. If you are appointed as a succession administrator in Louisiana, part of your job involves settling the estate’s debts.
Any outstanding estate debts must be paid using the estate’s assets. This can affect the assets that heirs receive if the property must be sold or otherwise used to pay off debts.
What are estate debts?
Estate debts include debts the decedent acquired during their lifetime and debts that arose due to the decedent’s death. These can include burial costs, funeral costs, executor fees, succession filing fees or medical bills.
Louisiana law requires estate debts be paid in a certain order, beginning with funeral expenses and court costs.
There are several steps that you must take before the estate debts can be paid. You must identify all creditors and all outstanding debt balances. The debts must then be listed according to their priority.
If you are a successor, you might be required to pay estate debts. There are two types of successors: universal successors and particular successors.
Universal successors are heirs who have the same rights of and obligations as the decedent when it comes to the property they receive. Particular successors only have obligations to the specific property they receive and are not liable for estate debts.
Sometimes there may be more than one universal successor. They are required to share in the debt payments, with the successors who receive a greater share of assets paying the larger portion of estate debts.
Will I end up having to pay the debts myself?
If you are an heir, this could make you anxious that you will lose money after receiving the property. However, you are not required to use your personal funds or assets to pay the estate debts.
The law states that heirs must only pay debts up to the amount of the value of the property inherited at the time of receipt.
For example, if the decedent has debts totaling $100,000 and you receive their one asset, valued at $50,000, you are only required to pay $50,000 of that debt, likely coming from the sale of that asset. You are not required to come up with an additional $50,000 to pay the rest of the debt.
Sometimes people pass away without enough estate assets to pay off all their debts, or no estate assets at all. In these cases, debts typically go unpaid.
However, most estates have some type of debt and an estate with debts is usually complicated. Knowing how to identify and value estate debts is important to ensure an accurate estate administration.