When a loved one dies, the assets he leaves behind constitute his estate. The probate court assumes responsibility for your deceased loved one's estate and uses the money to pay off creditor claims before turning the remainder over to his beneficiaries. If your deceased loved one did not leave behind any assets or if his debts exceed the value of his assets, the estate is classified as “insolvent.”
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Not all states require an insolvent estate to go through probate. The state of Washington, for example, allows beneficiaries to bypass probate if the deceased's estate lacks sufficient assets to pay off creditors. Even if your state does not require probate for an insolvent estate, opening a probate case is advantageous if you need help handling the deceased's debts. The probate court will notify creditors of the deceased's insolvency. This saves you the trouble of fighting with creditors and collectors while grieving.
You have the right to pay off any of your deceased loved one's debts that you choose but, in most cases, creditors cannot force you to do so. Legal responsibility for payment rests with the person who owns the account. If the estate does not contain the necessary funds to resolve the decedent's financial obligations, her creditors must generally write off the debt.
Your loved one's creditors aren't likely to give up on collecting payment just because the deceased left behind an insolvent estate. Debt collectors often contact the deceased's family members and push for payment. The Fair Debt Collection Practices Act gives you and your family members the right to force collectors to stop contacting you about the deceased's debts. Provided you put the request in writing, any collectors that contact you demanding payment on the deceased's debts violate the FDCPA by doing so. Other ways collectors may violate the FDCPA when attempting to collect from family members of the deceased include threatening legal action, threatening to damage the family members' good credit and calling repeatedly to the point of harassment. You and your family can file a lawsuit against any collectors that violate the FDCPA during the collection process.
Lack of Debt
Just because your loved one left behind no assets, that does not mean that he also left behind outstanding debts. If your loved one paid off his debts before he passed away, his lack of an estate is far less problematic for the family members left behind. If your state requires probate for all estates, insolvent or not, the empty estate must still pass through probate – even if it lacks both assets and creditor claims.
References & Resources
- New York Life: Knowing How It All Works
- Washington State Probate: Washington Probate Instructions
- The New York Times: You're Dead? That Won't Stop the Debt Collector
- Federal Trade Commission: The Fair Debt Collection Practices Act (Section 805,896/p. 6-7)
- AARP: Debts After Death
- American Foundation for Suicide Prevention: Settling the Estate
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