How do creditors get paid?

Part of the probate process is to notify creditors of the death. Notice requirements vary. In some cases, you must provide direct notice. In others, you must publish a notice in a newspaper in the city where the decedent lived. Creditors must file a claim with the court for the amounts due within a fixed period of time.

If the executor approves the claim, the bill is paid out of the estate. If the executor rejects the claim, the creditor must sue for payment. If there is not enough money to pay all debts, state law determines who gets paid first. The personal representative most likely will sell property to pay approved creditor claims. Remaining claims are paid on a pro-rata basis.

If I am a beneficiary and the estate does not have enough money, do I have to pay creditors out of my own pocket?

Generally, no. The law says you cannot be made responsible for others’ general debts without your consent. Unless the decedent gave away his or her assets to someone shortly before dying, or otherwise acted in concert with them to defraud the creditors, the beneficiaries should not have to pay the creditors just because they are beneficiaries. There may be nothing left in the estate for the beneficiaries after paying the creditors. But, the beneficiaries will not owe the creditors money. Still, if the children or beneficiaries took property or benefits from the decedent or the estate, or assumed liability for care given the decedent, or guaranteed payment, they can be liable for some or all of the decedent’s debts separately.

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