One of the major concerns of family members who have lost a loved one has to do with the financial aspects of the death. People who are dealing with an estate that is a fairly nice size will have to determine what debts must be paid and in what order. The estate administrator is the person who will have to deal with these matters.
When you are going over the assets and debts for an estate, you need to understand how to handle the debts. There are several factors that have to be considered. Here are a few that you need to remember:
Secured vs. unsecured
Secured debts, such as a home that has a mortgage, can usually be collected by the creditor because they can just take the property back. Unsecured debts, such as credit card debts have no guarantee for being paid. California laws set all debts into categories that dictate the urgency to pay. Priority debts must be paid first. Any funds that are left from the estate after those are paid would then trickle down to other debts. When debts that are required to be paid are all taken care of, the heirs will get the remainder of the estate.
One interesting thing to note about mortgage debt is that the mortgage company can’t demand that a mortgage is paid off immediately if there is a co-owner on the home. Instead, the co-owner would have to continue making the payments on the home. If there isn’t a co-owner, the person who inherits the home could pay the mortgage off or the estate might pay it off. In some cases, it is possible for an heir to just pick up the payments on the mortgage.
Student loan debts
With the exception of student loans who have a co-signer, there isn’t any guarantee that these loans will be paid when a person passes away. If the estate has the money to pay them, they can be covered. If not, the debt is likely going to have to be charged off.
Other debts, such as credit card debts and medical bills, will be paid as possible from an estate. Just like student loan debts, these will have to be dismissed if the estate is unable to pay. As is the case with many things that have to do with probate, administrators should verify the order that bills for the estate must be paid.