When a parent passes away, oftentimes their spouse or adult children are left to settle the estate. While debt may be the last thing on the mind of someone that loses a loved one, it is an important issue that may arise upon their passing. Many people have similar questions when it comes to estate debt: Are the beneficiaries responsible for a loved one’s debt upon their death? What happens if the assets of the estate amount to less than the debt the parent owed?
In New Jersey a surviving spouse may not be held responsible for the debts left behind by either husband or wife unless it was a debt that both parties undertook together. In other words, if an individual leaves a debt behind when he or she passes away, it will not tarnish the credit score of the surviving spouse.
First to be paid are reasonable funeral expenses. Second in line to be paid are any administration expenses including legal fees, probate fees, and appraisals, among others. The third level of expenses to be paid are debts for services rendered by the Office of Public Guardian for Elderly Adults. Next is the payment of federal and State taxes, interest and penalties. Medical expenses and hospital expenses of the last illness, including payment for person’s providing care shall be paid. Judgements against the decedent are paid next. Unsecured creditors are the last to be paid by an estate if the money is available.
The executor of the will or administrator is responsible for notifying creditors of the death. Any creditor with notice must file a claim against the estate to recover any monies owed. An executor or administrator of the estate must follow the priority order established by state law when paying any claims.
If there are not enough assets in a decedent’s estate to pay all of the outstanding debts, the estate is insolvent. If there are insufficient assets to pay all of the creditors, an application must be brought to the court with a proposed distribution plan as to the payment of outstanding debts in accordance with the priority status of the claimant. A surviving spouse or children of the decedent are not personally liable for payment of any unpaid debts of the estate.
The loss of a parent can be stressful and overwhelming for their surviving loved ones. In some instances, the passing of an individual can lead to complex financial and legal issues. The attorneys of the Law Offices of Hunziker, Jones, & Sweeney, P.A. have experience assisting New Jersey residents with all aspects of trusts and estates, including wills, estate administration and estate taxation. Our estate planning lawyers are trusted by our clients to handle each legal matter with diligence and compassion. For more information or to schedule a consultation, call our New Jersey estate planning firm at (973) 256-0456.
