There seems to be a common misconception among consumers that any debt incurred while still living will be null and void when death arrives. While it would be nice if this were true, unfortunately it is not the case. Once a debtor passes away, creditors will then begin to look at the estate to find assets that can be liquidated.
When a person dies and an estate representative is appointed, it is the fiduciary duty of that person to notify all known creditors of the decedent. Those creditors will have up to six months to file claim against the estate for amounts owed. During that time, any money that arises from the estate whether it be cash from a safety deposit box, or proceeds from the sale of an asset, must be deposited into a designated estate account. At the end of a claims period, a probate judge will decide which claims are valid, and which are disallowed.
When all claims have been filed and all assets liquidated, creditors will be paid out of money in the estate account. No beneficiary will receive any cash disbursement until these claims have been certified as paid. This means that if the decedent owed multiple debts, but did not have a substantial amount of valuable assets with which to pay those debts, there may be no money left at the end of the probate process.
More than one family have been shocked to find out there was no money for disbursement after a loved one passes on. Ask yourself this question. Does the person whom you have appointed as your personal estate representative in your will know how much money you owe to creditors? If not, it may be time that the two of you sit down with an attorney to discuss options for preserving and protecting your assets from those creditors after you are gone.