What Happens to Debt When You Die in Georgia?
The overwhelming majority of people who die in Georgia leave some debt behind. Our society is built on credit. So, many people are uncertain about what happens to their debt when they die.
Does it get wiped out? Or is the family expected to pay it? Does the executor have an obligation to take on any of the debt? The answers depend largely on the situation.
Executors Are Not Responsible for Debts Unless They Act Improperly
The first concern to clear up is about the potential liability of the executor. People are often afraid to take on estate administration because they are afraid they will have to cover the deceased person's debts if there's not enough money to pay them. This is not true.
An executor would typically only be personally liable for debts if they made serious mistakes in administration. When an executor follows all probate requirements, notifies creditors properly, and doesn't distribute property to others until all known debts are settled, then they should not incur any liability for debts. Working with an experienced probate attorney is the best way for an executor to avoid mistakes and protect their interests.
The Estate Pays Debts to the Best Ability Possible
When someone passes away, the property they leave behind becomes their probate estate unless it passes directly to others through a beneficiary clause or other means. Debts left by the deceased person are expected to be paid by the estate.
Sometimes, the value of the probate estate is not great enough to cover all the debts. For that reason, Georgia law provides an order in which bills get paid. Certain creditors will be paid first, and others may be out of luck if there is no money left at the end. Heirs or beneficiaries would get nothing from the estate, because the first priority is to pay off the debts of the decedent.
The law generally provides for the funeral expenses to be paid first. Expenses for final medical expenses may also be a priority.
If a debt has a co-signer, the creditors may seek payment from the co-signer instead of the estate. When property includes a house with a mortgage or a vehicle with an outstanding loan, that property may be sold and the proceeds applied to the debt. If the property has a co-owner, that owner will have the responsibility to continue making payments until it is sold or otherwise transferred.
When a deceased person leaves unpaid student loans, those will generally be cancelled at death if those loans were obtained from the federal government. Student loans from a private source may still need to be paid by a co-signor or the estate, depending on the terms of the loan.
Credit card debts are often among the last to be paid, and they may be erased if the estate is out of money and there is no joint account holder.
Plan to Handle Debt
If you want to avoid passing debt along to your loved ones, the details matter. An estate planning attorney can look at the critical details of ownership, credit, asset structure, and other issues to determine whether you could be leaving loved ones responsible for your debts.
At Peach State Wills & Trusts, we develop comprehensive plans designed to meet your goals, and that means we consider all the relevant details others often overlook. To find out how our team could protect you with a plan that accounts for debts as well as assets, contact us today at 678-730-2079.