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Dealing with debt in your loved one’s estate

Acting as the executor or administrator of a loved one’s estate often brings many headaches. You have the responsibility for protecting and preserving the estate’s assets, you must ensure the smooth progression of the probate process, and you likely must deal with impatient heirs who are eager to claim their inheritance and put their grief behind them. 

Those heirs may not realize that part of the probate process is dealing with the creditors of the deceased. If your loved one left many debts behind, you will have to handle them carefully and in the correct order to avoid any personal liability. You can start that process right away even if probate for the estate is not yet open. 

Getting organized 

If you are someone who organizes your finances and keeps careful records of your bills, you may not understand when someone fails to take these important measures. Nevertheless, many do not, and you may find yourself searching through drawers, piles of mail, online accounts and even trash cans to gather the information you need to make an accurate list of your loved one’s debts.  

With a comprehensive list in hand, you will want to decide which bills you can cancel, such as magazine subscriptions, and which the estate or its beneficiaries should continue paying during probate, such as the following: 

  • Mortgage or rent 
  • HOA or condo fees 
  • Rent on storage spaces 
  • Property taxes 
  • Utility bills 

Some debts take a higher priority than others, and you should pay those first. Taxes, for example, are a priority debt, and you will probably have to complete and send your loved one’s final tax returns and maybe forms for federal estate taxes. Colorado does not have a state estate tax. 

Difficult decisions 

It is important that you ensure the debts you are paying are legitimate, and you may even want to try negotiating with your loved one’s creditors for a lower balance. If the outstanding debt is greater than the cash in the estate, you may have to liquidate some of the assets. Additionally, some assets may have debt attached to them. Heirs may have to decide whether they want to accept the house with a mortgage or vehicle with a loan, either of which will require them to refinance the loans. 

If you or the heirs continue paying the bills of the deceased during probate, the estate should reimburse you in most cases. Ideally, your loved ones debts will be current and simple to manage so you can quickly close the estate and move forward with your lives.  

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