Who Pays the Debt of a Deceased Family Member? By Spokane Probate Attorney Steven Schneider

It is the right of your family member to spend their money as the need or wishAre You Going to Inherit the Debt of a Deceased Family Member?
By Spokane Probate Attorney, Steven Schneider

When the loss of a family member looms it is difficult, but essential, to determine what debts are owed and where the records of those debts are kept. If you are named in a Power of Attorney or a Will as the person to handle those debts (Executor or Personal Representative), you have a duty to gather this information. Your family member may have already gathered this information or you may have to hunt through a desk or examine a month’s worth of bills to find credit cards, medical bills and other evidence of debt.

Each state has its own laws regarding the handling of estates whether or not there is a Will. In the state of Washington,

  • Debt taken on during a marriage can be considered community (or shared) property, even if it was strictly in your loved one’s name. But, please visit with me about your individual circumstances. Sometimes this area is grey: Spokane probate lawyer, Steven Schneider (509) 838-4458 or email at SS@StevenSchneiderLaw.com
  • Relatives whose names are not listed on the account cannot be held personally responsible for their family member’s debt; however, a creditor is entitled to collect from the estate left by the deceased.

In order to be paid however, the creditor must file a Creditor’s Claim within four months of the receipt of a Notice to Creditors, which is sent to them through the probate process after the death of the debtor. As a Spokane probate attorney, I can help you with this process.

  •  If the creditor does not file a claim, the creditor need not be paid.
  • If a claim is filed and there is a question about the debt, the Executor or Personal Representative of the estate has a duty to explore the validity of the claim.
  • Conversely, even without a claim, if a debt is secured by property of the estate, like a home loan or car loan, heir(s) do receive that property but must pay the debt. If you are in this situation, call me right away: Steven Schneider, Spokane Probate Attorney, (509) 838-4458) or email at SS@StevenSchneiderLaw.com
  • A credit card issued by a bank or credit union that has also made a car loan, may also be secured by the car.
  • Even furniture, major appliances and tires may be security for the debt.

Most importantly, if there is any doubt about what items are secured by the debt, contact the creditor. If you don’t have copies of the original loan documents already, request them from the creditor. If you are a signer on a joint bank account with the deceased, you may be an owner of the account if it was set up as a joint tenant with right of survivorship account.

    • In that case, the account becomes the joint tenant’s property on death and is never in the estate or subject to the estate’s creditors. Again, get the original account documents from the bank.
    • If there is anyone beside the deceased listed on the account, each account holder may be held legally responsible if there is any outstanding balance.
    • If you are a co-signer (not just an authorized user) the creditor will turn to you if there is outstanding debt.
    • Authorized users may not incur debt after the death of the primary account holder. If they do, they will be held responsible for those debts.

Both the estate and the Personal Representative are not liable for the decedent’s debts if no claim is made and the estate is closed after proper Notice to Creditors (see above). As a Spokane probate attorney, I would be happy to help you sort through these questions and more about the probate process. You can reach me at (509) 838-4458 or SS@StevenSchneiderLaw.com.

Debts that the estate itself incurs after the death, such as attorney fees, court costs and costs of the sale of property are administrative expenses and are paid before debts incurred prior to death.
It is the right of your family member to spend their money as they wish.

Remember, it is the right of loved ones to spend their money as they need or wish, as shown in the photos in this article. Just try to remember if you have ever signed on as a co-signer on any accounts to which any charges may have been applied. And, sadly, death can happen at any age.

Probate vs Living Trust – by Spokane Probate Attorney, Steven Schneider

Last Will & Testament

Probate May Be Less Costly and Easier Than Living Trust

It is common to hear the advice “Avoid Probate” when considering estate planning. In my experience, this usually means that an advertising pitch is being made to try to convince you to buy a Living Trust package instead of a Will. In the State of Washington however, the probate process is generally no more expensive than dealing with the same property through a Living Trust.

An average couple with a Will and Community Property Agreement can simply record the Community Property Agreement on the first death for normally under $100. Upon the death of the surviving spouse or domestic partner, it costs $240.00 to submit the Will to probate and most likely around $1,000.00 for the attorney time involved. There is usually not even a trip to the courthouse for the Executor.

With or without a will, Washington law grants “non-intervention powers” to most Personal Representatives (generic term for Executor) meaning that the court takes no part in the process unless there is a dispute. The Personal Representative also has authority over non-probate assets, including separate property, joint tenancy with survivorship, and property in trusts. Being a Spokane probate attorney is a great opportunity to help my client’s sift through the difficult choices they face when creating a will or trust.

The probate process also cuts off the claims of creditors after four months and limits the liability of the Personal Representative once the probate is closed. A simple Will, Durable Power of Attorney, Community Property Agreement and Advance Directive shouldn’t cost more than $500.00 to $750.00 to prepare for an average person or couple. If any Federal or State tax would be due upon death, or if a complex trust is required, there would be additional costs and time incurred.

Living Trusts cost as much or more than the Will package to prepare. With a Living Trust you also need a Durable Power of Attorney, a Community  Property Agreement and an Advance Directive. There is also a cost in transferring your property by Deed or other document into the trust. On death the same property must be transferred out of the trust. If significant property has been left out of the trust by mistake, you may still have to file a probate to clear title or transfer certain assets.

You should have estate planning that is appropriate for your assets, income, heirs and stage of life. While a Living Trust may be appropriate, a simple probate may also be the most economical choice.

Call me at (509) 838-4458 or by email at ss@StevenSchneiderLaw.com if you have any questions regarding making a will.

A Last Will is used to distribute property to beneficiaries, specify last wishes, and name guardians for minor children. It is an important part of any estate plan. Without one, your estate will pass according to state statutes which might not provide for distribution of your assets as you intend.

A Living Trust is used to transfer property to beneficiaries on death without a court filing.  If any property has been left out of the trust or if there is some dispute over distribution, a court proceeding may still be required.

A Living Will or Advance Directive lets you outline important healthcare decisions in advance, such as whether or not to remain on artificial life support and specify organ donation.

A Durable Power of Attorney gives someone else the power to manage your assets for your benefit , but only as long as you are alive.

A Community Property Agreement is used to transfer property to a surviving spouse without a court proceeding.  The agreement may also state that all property acquired from any source becomes community property.

“Save the House,” by Spokane Probate Attorney Steven Schneider

Image

Why Grandma, What big eyes you have………

                                Run kid, it’s not Grandma, it’s her bank!

Spokane Probate Attorney, Steven Schneider, saves red riding hood's  house from big bad wolf.

Above: This Red Riding Hood forgot to save the house in her grandma’s estate. Pictured below: This Red Riding Hood didn’t

If real estate is passed to an heir in probate, the ownership is effective on the date of death. You can end up like the red riding hood in the picture at the bottom of the page, instead of the red riding hood in the picture at the right. A completed probate is, however, necessary to pass clear title.  The real estate is also subject to any home loan secured by the property.

Since there is a four month period for creditors to submit claims to the estate, usually a lender will be patient even if payments are not made during this period. This does not necessarily mean the heir can assume the loan.  The lender will evaluate the heir as if they were applying for a new loan.  Credit history and the amount of equity in the property will affect the heirs’ ability to keep the property. A house that is worth less than the debt owed on it will have to be sold in a ‘short sale’ to get the lender’s release in exchange for payment of all the net proceeds of the sale.  Unfortunately, in this situation an heir would have to buy the house from the bank. See an attorney who understands estates and real property law before making any decisions regarding such property. Pass this article, “Save the House,” by Spokane Probate Attorney Steven Schneider, to those you feel would find it useful.

Red Riding Hood and her Inheritance

Steven Schneider, Attorney at Law, saves Red Riding Hoods Inheritance