It is the usual case for people to leave behind unpaid debts when they die. This burden always shifts to the surviving spouse or heirs. Steps taken to recover the debt in such cases are always dictated by the type of debt and the applicable state laws. Focus always shifts towards the deceased’s assets, including real estate, possessions, and financial accounts.

“Fortunately for surviving spouses or other beneficiaries, in most cases that debt isn’t something they’d be responsible for,” said certified financial planner Shon Anderson, President of Anderson Financial Strategies in Dayton, Ohio.

Using the deceased’s estate to clear debts

Probate is the process of clearing a deceased’s debts and distributing any remaining assets to heirs. Upon death, a deceased’s property becomes an “estate.” States have different laws that govern the duration through which creditors have to claim the estate. It can take just months or even a couple of years in some states.

If there are insufficient assets or money in the deceased’s estate to clear the debts, the debts are then paid in priority until all the assets and money is finished. Remaining debts may be written off. However, if the deceased leaves no estate behind, the debts are always written off as there is no money to pay them off.

Every state has a separate set of rules that guide, which debts should be paid first from the estate. In most states, the priority is given to funeral expenses, cost of administering the estate, taxes, and finally, hospital and medical bills.

Who has to pay off the debts?

A deceased’s debts are always paid off by the executor or administrator. Executors are not held personally liable for any debts of the estate. There are some exemptions, however, and taking on this responsibility may come with some risk.

Many states have “community property” laws, making debt repaying for a dead person complicated. These states generally regard both assets and debts accumulated during the marriage the responsibility of each spouse. This means surviving spouse is responsible for paying the debt.