Are You Liable For A Deceased Loved One’s Debts In Pennsylvania?

In this article, you can discover…

• Which debts continue after a person passes away in Pennsylvania.
• Whether creditors can take money or assets intended for beneficiaries.
• When to involve an estate planning attorney in your loved one’s debts.

What Debts Continue After A Person’s Death Under Pennsylvania Law?

Nearly all valid debts will continue after a person passes away, and their estate will be responsible for paying those debts using estate funds or property. It is one of the executor’s responsibilities to identify which debts exist that are valid and still owed by the estate so creditors can be paid before beneficiaries receive anything. It’s a crucial step and, if skipped, means that creditors can come after the executor for the money they’re owed.

When identifying debts, don’t forget to check with the Pennsylvania Department of Human Services to see whether the Commonwealth has a claim against the estate. For example, if the decedent was on Medicaid, there could very well be a Medicaid claim that needs to be paid.

Be sure to check with the IRS to see if there are any back taxes that need to be paid as well. Unpaid property taxes, mortgage payments, medical bills, and credit card debt should also be identified.

But not all debts are treated equally, and Pennsylvania law establishes a hierarchy of creditors: Who is paid first and who is prioritized. Funeral expenses, taxes, and certain medical bills are paid first. If there is credit card debt, those credit card companies might receive a percentage of what is owed to them, or they may get nothing at all.

Many executors make the mistake of paying off credit card debt first, leaving them with nothing to pay funeral expenses or the IRS. That’s a huge mistake, and it’s best to allow a probate attorney to work with you to identify and prioritize debts properly, write letters to credit card companies explaining where you are in the process, and ensure debts are handled in order.

What Happens If The Estate Does Not Have Enough Assets To Pay Off Its Debts?

When an estate lacks sufficient assets to pay its debts, it becomes insolvent, a situation similar to bankruptcy. First, you’ll use the estate’s assets to pay priority claims (such as funeral expenses and taxes), and once that money is gone, remaining creditors will receive notice that there are no funds left.

In those cases, I’ll often schedule an audit hearing where it can be established that here are the estate’s assets, here are the priority claims, and here are the claims that were paid from those assets. Non-priority debts/creditors may not receive anything or only a small percentage of the debt, and the proposal for settling any remaining debts will then be approved by the court through a formal Audit hearing. If remaining creditors wish to object to the proposal, they may show up in court, though this does not typically happen if there are no funds left in the estate to argue about.

Can Creditors Take Money Intended For Beneficiaries During Probate?

Yes, they can. For example, if a will states that the residuary estate of $50,000 is to be divided among three children, the heirs won’t receive any of that money until all creditors are paid. If the estate owes more than $50,000, the estate becomes insolvent, and beneficiaries will wind up with nothing, as creditor claims take legal priority.

Are Family Members Personally Responsible For A Loved One’s Unpaid Bills?

In some limited cases, family members could be held responsible for a deceased loved one’s unpaid bills. While in most cases the estate will be liable, the IRS has far greater leeway to collect on unpaid debts. They could come after certain “non probate” assets, joint accounts, or beneficiary accounts. In very limited situations, specific types of medical expenses could also be sought from surviving family members.

In every case, it’s best to speak with a probate attorney to be aware of what your family’s exposure might be. The sooner you speak with an attorney about your loved one’s debts or creditor concerns, the better.

Is It Possible For Me To Reach Out To An Attorney On Behalf Of A Loved One Before They Pass Away?

Yes, and I have had many clients come to me with concerns about parental debt or liabilities before their loved one passes. This is especially true of adult children whose parents are struggling with memory deficits.

Unfortunately, if your loved one is still competent and is simply financially irresponsible, there is not much anyone can legally do. But if your loved one has considerable or growing debts and is no longer mentally competent, I can walk you through steps you can take to help protect your loved one from themselves and what is left of their estate.

Still Have Questions? Ready To Get Started?

For more information on responsibility for decedent debts in Pennsylvania, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (412) 276-4200 today.