Some of your debts may not disappear after death. As noted by Credit.com, joint mortgages and shared credit card balances generally become the responsibility of the surviving borrower.
If you have joint accounts with a spouse or an adult child, they may need to pay the remaining balances. Dying with unpaid medical bills, however, may result in your estate’s personal representative paying them from your available assets.
Which creditors may file claims and which assets may they take?
As described on the Florida Bar’s website, unpaid creditors may file a claim for outstanding balances during the probate process.Companies servicing unshared credit cards and medical debt holders typically seek payment from a deceased’s estate’s remaining assets. They have two years from the date of your death to file a claim. This two year claims bar date can be shortened considerably if your personal representative sends the Notice to Creditors to known creditors and publishes the Notice to Creditors in the local newspaper.
Whether you create a will or die without one, your assets must go through a Florida probate court. Creditors may recover payment from those assets listed in your name alone, such as a checking account. Your estate’s personal representative may also use property titled solely in your name to settle your debts.
What may happen if my assets do not cover my debts?
If an estate does not have enough value to repay the deceased’s creditors, the heirs may find the remaining debts forgiven. When the remaining balances on credit cards, for example, exceed the worth of an estate’s assets, the probate court may classify it as insolvent. In this case, creditors typically write off the remaining debts.
Beware: Under the Internal Revenue Code Section 6012(b)(1) the personal representative must file a decedent’s past due tax returns. If you have past due taxes, your personal representative must pay them from estate assets or they may be held personally liable for those taxes. Even if the court declares your estate insolvent, the IRS could still review its value to determine whether your estate could afford to pay past due taxes owed. The federal government (including the IRS and SBA) have a 6 year statute of limitations for seeking payment from an estate.
After your personal representative settles your debts, including taxes, your remaining assets may then pass on to your heirs. Some creditors may work with an estate representative to settle matters quickly, which could help your heirs receive your assets sooner.