Resolving Debts During Probate
Alameda County Probate Lawyer
When someone passes away, the property and assets they owned might not
necessarily be distributed to their loved ones. If they passed away with
outstanding debts, creditors could have their say in the value of the
estate first. It all depends on the situation.
At Sargent Law Offices, our Alameda County
probate attorney is here for you when you are dealing with a will going through
probate that involves significant debts. When you allow us to handle this
delicate situation, we may be able to find a way for you and your family
to hold onto the property of the decedent, even when banks and creditors
are expecting monies first.
Be sure to call us at 510.344.2599 today if you have any questions.
Secured and Unsecured Debts
If a debt is unsecured at the time of its owner’s passing, creditors
likely have a chance to get as much value out of the existing estate as
possible, up until the debt is paid off. Most of the time, this will be
done by appraising and selling off pieces of the estate. Only what is
left over after this is done will be distributed during probate, regardless
of what the will intended.
Creditors may sometimes seize or sell the following to collect on owed debts:
- Homes
- Automobiles
- Family heirlooms
- Savings accounts
If a debt is considered “secured,” it is more or less tied
to a particular piece of property, usually some real estate or a vehicle.
In such a situation, the property can be distributed according to the
will during probate, allowing loved ones to inherit it without fear of
creditors coming for it. The catch, however, is that the debt will be
transferred to its new owners. For example, if your loved one owed $10,000
of secured debt on a car and you inherited that car, you now owe $10,000
to the same party.
Probate and Funeral Costs
Probate court and funerals may be costly, and the decedent’s estate
is usually used to pay for them. Even in situations where the decedent
has outstanding loans, the value of the estate will most likely be applied
to probate, funeral, and burial expenses first. If this exhausts all potential
finances from the estate, creditors may not be able to collect anything
at all. Although this would also likely result in a situation where loved
ones inherit nothing either.
Does A Reverse Mortgage Go Through Probate?
Has your loved one distributed their property to you, but the home has
a reverse mortgage? Did they pass away without a will? If so, the estate
is subject to the probate process. The mortgage still applies to the estate
and must be paid off, and the remaining value belongs to the heir or beneficiaries
of the estate. The heirs need to agree to sell or keep the property. If
they wish to keep they must pay off the loan by acquiring a new loan by
refinancing or with money they have. If they wish to sell, they must contact
the mortgage company and inform them, they will have 3 months to a year to sell.
Debts Can Go Both Ways in Probate
Not all unresolved debts are owed by the decedent. There is the real possibility
that your loved one was owed money at the time of their passing.
This can be resolved in one of two ways:
-
Reverse gifting: Forgiving or erasing owed debts as a gift.
-
Collection: Adding the value of an owed debt to the estate itself.
To put the idea of collection into more specific terms, consider this example:
you owe the decedent $5,000 and the decedent owes $5,000 to their bank.
If they do not forgive your debt in their will, you could ultimately owe
$5,000 to that bank, as it was meant to go to the estate in the first place.
Have Questions? We Have Answers!
Money is a sensitive enough topic as it is without the addition of the
passing of a loved one. When you need to tackle the problem of debts during
probate, do not put it on your shoulders alone.
Instead, let Alameda County Probate Attorney
Hannah Sargent handle it for you. The legal counsel and guidance she provides is invaluable,
and you can learn that for yourself through a
free consultation!