Who owes for deceased's debts?

Q: What happens if a person passes away and no one files probate because the estate has no assets? Do any of the deceased relatives become liable for taxes owed by the person that died? Would the relatives have to pay off the debts to the dead person's creditors?

Answer: When a person dies, probate court is the venue of the legal process to distribute the deceased person's assets and to take care of his or her debts and liabilities.

Although not all assets may go through probate, the ones that do are distributed in accordance with the wishes set forth in the will signed by the deceased. If he or she had no will, the assets will pass to the deceased person's relatives in accordance with the laws in effect where the will is probated. (In some more complicated cases, the distribution might be dependent on laws in effect where certain property is located.)

If a deceased person had put assets into a trust, those assets do not need to go through the probate court, as they remain in the trust and are distributed in accordance with the terms of the trust. Insurance proceeds and retirement accounts with beneficiaries named will distribute those assets as required by the terms of the insurance policies and retirement accounts. Finally, money and assets held in joint tenancy with rights of survivorship will automatically pass at the time of the decedent's death to the survivor on the account or the survivor owning a home jointly.

The probate process is also there to give notice to creditors to come to the court and request payment for any money owed to them. If there are no assets in the estate, the creditors will get no money on the amounts they are owed.

Again, the intent of the probate system is to finalize the distribution of assets and the payment of debts of a decedent. A final accounting of all assets distributed and all creditors paid might be made to the court, and upon that final accounting the probate estate is closed.

Once the estate is closed, creditors of the decedent's estate that failed to show up after having been given notice of probate might be barred from trying to collect a debt against the decedent and the representative of the decedent in the probate proceedings.

You may want to consult an attorney that specializes in probate issues about any specific aspects of your situation. To answer your question in general terms, the debts of the deceased are his or her debts and not the debts of the family when it goes through probate. If there are no assets whatsoever, there are no assets to probate and the creditors' rights to pursue the estate of the deceased would continue, as they would not be extinguished in probate. Having said that, in the unlikely event that any money would appear after a person dies, the family might have to use that money to pay off the debts of the creditors before keeping any of it.

Although the laws and the timing for probate differ from state to state, the essence of probate is the same: attempting to distribute assets and pay off the debts of the decedent.

You should know, however, that in some cases the debts of one person can be collected against a spouse or other family member. For example, if you have a joint credit card with the deceased and you have run up the card's balance buying things for yourself, in some circumstances the credit card company might try to collect the balance owed from you.

As for medical bills, even if services were billed to the deceased, the care provider might nonetheless go after the spouse or child for the amounts owed. In some states, there are laws that permit the beneficiary of the service to become responsible for those debts in certain situations.

In these two situations, a person might be found liable for those debts whether or not a person has died. The death does not cause the debt to transfer to the other family member or users of the credit card. The debt would exist in those states that allow creditors to pursue the beneficiary of the services or user of the card at the time the service was provided or the goods were purchased. The subsequent death of the primary person on the debt would give rise to the executor of the estate having to pay those debts during the probate proceedings; and if the debts were not paid, the creditor could still go after the party that benefited from the services or goods purchased.