What Happens to the Debts of a Deceased Person

A person’s final days can be expensive. Nursing homes, hospice care, funeral and burial expenses can all eat into the financial legacy a person leaves when they die. Understanding what happens to the debts of a deceased person is important so you can create an estate plan that takes these expenses into account, and so your personal representative, surviving spouse, and other loved ones will know what to do when collections agents come calling.

Where Does Debt Go When You Die?

In Connecticut, most debts live on after a person dies. Creditors are entitled to be repaid for the debts you owe out of the assets left in your probate estate. It is up to your personal representative (called an executor if there is a will and an administrator if there isn’t) to sort out valid and enforceable debts from those that are uncollectible, and to make sure each debt is given its proper priority. Only after the debts of a deceased person have been fully paid, will their heirs or beneficiaries receive a distribution of their remaining assets.

Notice to Creditors Sets Deadline to Debt Collections Claims

Within 14 days of the Connecticut Probate Court appointing a personal representative, it will issue a published notice to creditors in a local newspaper. This publication notice starts a 150-day clock for creditors to present their claims for unpaid debts to the personal representative. But the personal representative can shorten that waiting period if he or she has a list of the deceased person’s creditors. Using certified mail, the personal representative can set a date at least 90 days in advance for all claims to be due. Within 60 days after the notice period expires, the personal representative must review each claim, allow or reject it (in whole or in part), and submit a Return of Claims with the Connecticut Probate Court.

If a creditor misses the 90-day deadline, the claim is barred and cannot be collectible. Creditors who miss the 150-day publication deadline and didn’t receive a notice by mail may still be able to collect valid claims from beneficiaries after the assets have been distributed. This is why it is important to keep an updated list of creditors as part of your estate plan, so they can be notified directly.

Priority of Debts and Distributions in Connecticut Probate Administration

Once all the deceased person’s debts have been identified, vetted, and allowed or rejected, the personal representative must use the probate estate’s assets to pay off the deceased person’s debts following a certain priority order:

1. Family and household allowances (including one year of support)
2. Funeral and burial expenses
3. Estate administration expenses (including probate attorney fees, tax preparers’ fees, and personal representatives’ commissions, among other costs)
4. Reasonable expenses for the deceased person’s final illness
5. State and Federal taxes and other government debts
6. Preferred claims (including judgments, secured loans, mortgages, and liens)
7. All other claims (including credit cards, personal loans, etc)

Beneficiaries and heirs will only receive inheritance from the assets that are left over after all these expenses are paid. That is why coordinating your estate plan and financial planning is so important, so you can be sure there are enough assets to pass on your legacy.

What Happens if There are More Debts Than Assets

If the estate’s assets are insufficient to pay all the deceased person’s debts, it is up to the personal representative to inform the Connecticut Probate Court that the estate is “insolvent.” Then whatever funds remain will be divided among the remaining valid creditors, except if creditors are paid out of order. If an estate is insolvent, the person’s heirs or beneficiaries will not be responsible for the shortfall or unpaid debts. However, if a distribution is made before a creditor asserts a valid claim, it could seek to recover the funds paid prematurely by the estate.

Surviving Spouse’s Obligations to Pay Debts of a Deceased Person

While your loved ones aren’t usually personally responsible for your debts after you die, Connecticut law has an exception to this rule for surviving spouses. Under this law, spouses have a joint duty to support their family. This includes the payment of certain debts incurred by the other spouse (unless the spouses are separated and a support order has been entered):

• Physicians’ reasonable and necessary medical billing
• Hospital expenses (including those of a child living in the home)
• Rental expenses for the spouses’ shared residence
• Items purchased for the joint benefit of both spouses or support of the family

However, be careful not to read this exception too broadly. Not all medical care is covered. For example, debts related to nursing home expenses and medicine do not have the same joint responsibility.

Other Times Beneficiaries May Have to Pay a Deceased Person’s Debts

Life comes in many different forms and families of all kinds make financial decisions that can affect a beneficiary or heir’s obligations after the death of a loved one. You may be responsible for a deceased person’s debts if:

• You are a co-signer on a loan
• You are a joint account holder on a credit account (not just an authorized user)
• You assume the debt after the person dies (often a mortgage on a family home)

Estate Planning to Limit Estate Liability for Debts After Death

If you are worried about your beneficiaries facing debt collectors after your death, there are things you can do to shield your assets and remove them from your probate estate. For example, you may consider titling certain assets jointly so they pass automatically upon your death. With strategic estate planning, you may even be able to get your estate small enough to take advantage of Connecticut’s Simplified Probate Court Proceedings. In addition to reducing the size of your probate estate, this can limit the exposure of your assets to creditor claims filed with your estate after your death.

Get Help Filing a Small Estate Affidavit in Connecticut

If you would rather leave your assets to your loved ones rather than your creditors, you need a comprehensive estate plan that anticipates your financial needs and expenses. The estate planning attorneys at Lawrence & Jurkiewicz, LLC represent clients in Hartford and Litchfield Counties. Attorney Edward Jurkiewicz has decades of experience helping individuals and families plan for their future. He can help you understand Connecticut law around the debts of a deceased person, and make the most of your estate plan to reduce your family’s risk. Please call us at 860-626-1333 or contact us at your convenience to start planning for your final expenses today.