What happens if executor doesn’t pay off dead person’s debt?

Ask NJMoneyHelp

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Q. If someone passes away, is the executor of the will responsible for paying off the credit card debt? What if they decide not to pay it off?
— Executor, maybe

A. Paying off debt is one of the most important jobs of an executor.

The executor is required to marshal the assets of the estate and pay the deceased person’s debts, including credit card debt, before assets are distributed to the beneficiaries of the estate, said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.

Whitenack said under New Jersey law, if the assets are insufficient to pay all of the claims against the estate, payment must be made in the following order:

  1. Reasonable funeral expenses.
  2. Estate administration expenses.
  3. Reasonable services rendered to the deceased person by the New Jersey Office of the Public Guardian for Elderly Adults.
  4. Debts and taxes with preference under federal or New Jersey law.
  5. Reasonable medical and hospital expenses of the deceased person’s last illness including compensation for those attending that person.
  6. Judgments entered against the deceased person.
  7. All other claims.

Creditors must present their claims to the executor in writing and under oath within nine months from the date of the deceased person’s death, she said.

“If a claim is not presented within that time, the executor will not be liable to the creditor with respect to any assets which may have been paid to other claimants or distributed to beneficiaries,” Whitenack said.

The executor has three months from the time she is presented with a claim to dispute it by giving written notice, then the creditor then has three months after receiving notice of the dispute to file a lawsuit against the executor, she said.

So if there’s not enough money to go around and you have made the payments in order, you should be fine. But if you’re trying to avoid paying debt so there’s more for the beneficiaries, you could end up in trouble.

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