Many people are deeply in debt. Whether the debt was caused by poor financial habits, an economic downturn or just bad luck, the thought of leaving your family to inherit any part of that debt is stressful to say the least. Laws about death and debt do vary from one state to another, but generally no one can actually inherit your debt after you pass away. To learn the specifics about your own state laws, consult with a licensed probate attorney.
Probate Court
When you own certain types of property, most states will require a probate court case to be opened upon the event of your death. In some states this isn't required unless your property is valued above a certain mark, but generally the probate court proceedings are how your heirs get your property into their names legally.
Estate Administrator
As part of the probate court case, the judge will assign a personal administrator, also known as an estate executor, to take care of the legal paperwork and processes that are required as part of probate. You can assign your own estate executor before you die or you can leave it for the judge to assign one for you. Executors can be legal specialists such as your personal lawyer, or they can be a friend or relative.
Assets and Debts
The estate executor will create an inventory all of the assets you own that must go through the probate process, and he'll also create a full inventory list of all outstanding debts you owe. The executor will send official death notifications to all of your creditors and any other interested parties such as beneficiaries. Finally, he will pay off your debts using the assets from your estate as needed. Since your estate pays off your debts they cannot be inherited by anyone. If your estate does not have enough value in the assets to cover all debts, the creditors are forced by law to write off any remaining portions of the debts.
Remaining Assets
Assets that remain as part of the estate after all debts are paid go to the heirs and beneficiaries. The estate executor must distribute assets according to the terms of your will if you have one, otherwise she must distribute them according to state law.
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