When someone passes away, their debts don’t simply disappear. Before any assets can be distributed to heirs, all outstanding financial obligations must be addressed through the probate process. If you’ve been named the executor or personal representative of a loved one’s estate, understanding how debt is handled during probate is critical—especially to avoid personal liability.
You are not personally responsible for paying the deceased’s debts unless you co-signed a loan or account. However, managing estate debt involves several legal steps, and mistakes can delay probate or even lead to legal complications. That’s why many families in Madeira and throughout Ohio rely on experienced estate planning attorneys to ensure the process is handled correctly.
Common Types of Debt Left Behind
Most estates include some level of debt, which must be addressed during probate. Typical obligations include:
- Utility bills
- Mortgage payments
- Credit card balances and lines of credit
- Personal and business loans
- Medical bills and end-of-life care costs
- Federal, state, and local taxes
- Property taxes
- Student loans (note: federal student loans are often discharged upon death)
- Retirement account or life insurance loans
- Funeral, burial, or cremation expenses
As executor, you must locate all known debts and determine how they will be paid from the estate’s assets.
Which Debts Get Paid First?
Ohio law requires that certain debts be paid in a specific order of priority. Here’s the typical hierarchy:
- Probate administration expenses (e.g., court fees, attorney fees).
- Funeral and burial costs, up to $4,000 for the funeral and $3,000 for the burial.
- Family allowance to support the surviving spouse or minor children during probate.
- Final medical expenses, including hospice and nursing home care.
- Taxes owed to local, state, and federal governments.
- Debts with legal preference, such as child support or restitution.
- Unsecured debts, including credit cards and personal loans.
Remaining assets, after these debts are paid, can then be distributed to beneficiaries named in the will.
What Happens If the Estate Can’t Cover the Debts?
If the estate doesn’t have enough assets to cover all debts, it is considered insolvent. In that case:
- Assets may need to be liquidated to cover costs.
- Gifts in the will may be reduced or eliminated.
- The court follows the statutory order to pay debts as far as the funds allow.
- Any unpaid debt is typically written off—surviving family members are not liable, unless they co-signed or jointly owned the debt.
Proper handling of an insolvent estate is essential to avoid disputes and protect against creditor claims.
How Are Debt Claims Verified and Challenged?
One of the executor’s duties is to verify the legitimacy of any debt claims. Here’s how that works:
- Verify claims: Creditors must present documentation such as invoices or contracts. The executor confirms amounts, dates, and whether the debt is still enforceable under Ohio law.
- Notify creditors: A public notice must be published, and known creditors must be directly notified. Secured creditors must be notified by certified mail within two months of appointment.
- Assess and dispute: Executors can challenge questionable claims—such as bills that are inflated or already paid—by submitting evidence.
- Court resolution: If disputes cannot be settled, the probate court will review both sides and issue a final decision.
- Settle approved debts: Valid claims are paid according to priority from available estate funds.
A Madeira Estate Planning Lawyer at Wolterman Law Office Can Help You Navigate Probate
Our Madeira estate planning lawyers at Wolterman Law Office are here to help you settle your loved one’s estate with confidence. Call us today at 513-488-1135 or contact us online to schedule a free, confidential consultation. Located in Loveland and Blue Ash, Ohio, we proudly serve clients in Hamilton County, Fairfield, Norwood, and Forest Park.