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Who’s going to pay your debts when you pass away?

On Behalf of | Jul 6, 2022 | Estate Planning |

You’re likely going to have some debts that need to be paid after you pass away. If the passing is unexpected, this could include things like a mortgage or a car payment. But even those who have planned ahead and understand their situation may still have things like taxes, utility bills, credit card bills and other types of debt that you simply can’t fully eliminate in advance. 

So what happens to this debt? Who’s in charge of paying it off? Do you need to plan for this in advance?

Your estate executor will use your assets

As a general rule, your state administrator, often called an estate executor, is going to use the assets from your estate to pay your own debts. It is their job to do it, but they’re not using their own money. They’re using the money that you’ve left behind in the estate.

As a result, it can be a good idea to create a special fund just for this purpose. You likely know roughly how much you should owe for things like utilities, income tax, property taxes and the like. A fund that gives someone the money to pay that debt makes their job a lot easier.

But even if there isn’t a specific fund, the estate executor still has access to all of your assets. They may need to pay off some of your debts before they’re allowed to distribute those assets to your heirs. This means that failing to create a fund could mean that your heirs, though they don’t have to pay themselves, will still inherit less than they would have otherwise.

As you get your plan down and put everything in place, take the time to consider all of the options at your disposal and what steps will best help your family.