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Liability for debts of the deceased

Residents of New York who have recently lost a loved one may wonder what debts they could be liable for repaying. The first question to be answered is who is responsible for the financial administration of an estate. If there is a will, an executor should be named. If there is no executor, the state will appoint someone to oversee a deceased person's financial affairs. This person is called the administrator and is chosen in part by their relationship to the person who has died. Generally, the surviving spouse and children are the first ones asked.

In general, debts must be paid with what remains of the estate. However, the debts do not always pass to anyone else if they cannot be paid. In these cases, creditors simply have to write off the debts of the deceased as losses most of the time.

There are a few exceptions to avoiding the inheritance of someone's debts. Some states require the surviving spouse to pay some types of debt, but these tend to be debts related to Medicaid and health care and not credit cards. Community property laws could leave spouses liable for more debts, but New York does not have those laws. Technically, the adult child of a parent who could not pay for long-term care may be liable for that bill in some states, but that law is rarely invoked. Finally, executors or administrators who do not act within certain legal boundaries may be responsible for debts.

Individuals should be aware of their rights if collection agencies try to make them pay for the debts of the deceased. Furthermore, collection agencies discussing debts with anyone except a spouse or the parents of a deceased minor is illegal, and the Federal Trade Commission should be notified in such circumstances. If there is a question of whether or not someone's debt is inheritable, an estate planning attorney may be able to assist in determining the answer.

Source: The Motley Fool, "What Happens to Credit Card Debt When Someone Dies", Peter Andrew , July 19, 2014

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