According to reports published by Experian, the average American dies with over $62,000 in debt (including mortgage debt) and over $12,000 (without mortgage debt). So what happens to all this debt upon death?
During the estate administration process, regardless of whether the deceased had a will in place or not, if the estate has enough assets to cover all the debts, then assets are liquidated, creditors get paid and the beneficiaries receive whatever is left over.
If the estate does not have enough assets to cover the debts, then creditors line up according to rules of priority. They may receive some partial payments until the money runs out. For example, under Maryland law, the costs of administration, funeral expenses and tax liability all have a higher priority than other creditors.
Family members and/or beneficiaries are not liable to pay off the decedent’s debts unless they are co-signers on the debt.
Proper planning can help alleviate the stress of the loved ones left behind to handle and settle the debts. For more information on estate planning in the Greater Baltimore area, please contact Stouffer Legal at 443-470-3599.