When someone dies, they usually leave behind both assets and debts. Whether you are the Personal Representative (also known as the Executor) or a beneficiary of an estate you may find yourself wondering what happens to debts of the decedent.
It is always best to consult with an experienced South Carolina Estate Planning Attorney with specific questions regarding any aspect of the probate process; however, a general overview of how creditors of an estate are handled may be helpful in the meantime.
Shortly after the decedent’s death the Personal Representative of a testate estate or of an intestate estate will begin the probate process. One of the first tasks that must be accomplished during probate is to notify creditors of the estate that probate has been initiated. Notification is done personally or by publication, depending on the type of creditor. In most cases, creditors then have a specific time period (8 months in South Carolina) within which a claim against the estate must be filed.
The Personal Representative then reviews the claims that are filed and approves or denies each claim. Approved claims are paid out of the estate assets. Creditors whose claims are denied may have the option to litigate the claim. If the estate lacks liquid assets, estate assets will likely have to be sold to pay creditors. In most states, some assets are exempt from creditor claims during probate. Though exempt assets will vary by state, a homestead (up to a certain value) is a common exemption.
If the estate still does not have sufficient assets, claims are prioritized as follows:
- Taxes, funeral expenses, and administrative expenses relating to the probate of the estate (including attorney costs)
- Secured debts such as a mortgage on real property
- Unsecured debts (credit cards, utilities bills, personal loans)
Debts owed to the U.S. government must always be paid before any assets can be transferred out of the estate. Once all of the claims are paid, and the probate is properly closed, the remaining assets may be transferred to the intended beneficiaries or heirs of the estate.
If you are the Executor or Personal Representative of an estate it is crucial that you understand the laws relating to creditor claims because you could face personal liability for making an error and mishandling estate assets. It is always best to seek legal assistance from the start and not attempted to complete the probate on your own.
Whether you are the Personal Representative of an Estate, or a beneficiary, IKON LAW, LLC can help. We know this can be a confusing area of the law, which is why the attorneys at IKON LAW, LLC provide a personal approach to our client representation. We dedicate ourselves to providing superior legal services, keeping the best interest of our clients as our top priority. We have a caring staff dedicated to taking care of you and your family’s needs.
Please contact IKON LAW, LLC at 843-416-8498 or click here to schedule a Free Consultation. No matter what, the attorneys at our firm, Jessica Wentworth and Ashley Blum will put your needs first. We are committed to providing our South Carolina clients with reliable services when dealing with difficult situations.