Managing Debts in Probate
When a loved one passes away, their estate goes through a legal process known as probate. During this time, any debts left behind by the deceased must be addressed and settled. For individuals in Oklahoma City, understanding how to manage debts in probate is crucial to ensure that the process runs as smoothly as possible. To navigate this complex process, you may need the assistance of an experienced Oklahoma probate attorney. We can help; at Entz Burton & Associates estate planning law firm, we help individuals create customized estate plans that accomplish their goals and assist families in navigating the probate process. For those dealing with trusts, a trust administration lawyer can provide invaluable guidance. Call us at 405-773-9800 to set up a consultation now.
As you learn more about the probate process, you may wonder if there’s any way to bypass it completely. There is a lot that can be done, particularly during estate planning, to skip probate. Certain assets do not go through probate, including those held in trusts. Additionally, if an estate is small enough, the family may be able to handle it with a faster and more streamlined process. Our team of probate and trust administration lawyers in Oklahoma is dedicated to helping you understand and utilize these options.
Understanding Probate and Its Impact on Debts
Probate is a crucial legal process that takes place after an individual’s death. It’s the way the court helps distribute the person’s assets and pays off any debts they owed at the time of their passing. Debts rarely disappear with an individual’s death; instead, the estate becomes responsible for paying off those debts.
During probate, the court supervises how the deceased’s debts and taxes are paid. This ensures that the right creditors get paid before anyone else receives their share of the inheritance.
Identifying and Prioritizing Debts in Probate
In the probate process, the first task is to figure out which debts the deceased person owed. This means you’ll need to collect all their financial papers, like bank statements, bills from credit cards, and loan documents. Once you have a clear picture of the debts, they must be sorted in order of importance, following the rules set by the state. For those in Oklahoma City, it’s important to know that not all debts are treated the same. Each state has its own requirements regarding how debts are paid. Under state law, Oklahoma estates must pay expenses and debts in the following order:
- Funeral expenses
- Expenses related to the decedent’s final sickness
- Funds required for the support of the family, per court provisions
- Taxes, including federal, state, and local
- Debts given special preference
- Judgments and liens against the decedent
- Demands presented to the estate administrator for an allowance or proven within two months of the published notice
The Role of the Executor or Administrator in Debt Settlement
The executor or administrator has a vital job during the probate process: they’re in charge of handling the deceased’s debts. This role involves reaching out to let creditors know about the person’s passing and rounding up all the estate’s assets to figure out their worth. In addition to contacting creditors directly about claims against the decedent’s estate, they must also publish a notice of their loved one’s death to allow creditors to make claims against the estate. Not only must the executor respond to claims from creditors, they must validate those claims.
Dealing with Insolvent Estates: What Happens When Debts Exceed Assets?
Navigating the situation when an estate doesn’t have enough money to cover all its debts can feel overwhelming. This is known as dealing with an insolvent estate. In these cases, Oklahoma law steps in to outline a clear path forward, ensuring that creditors are paid in a fair and orderly manner. Generally, debts are paid in order of importance as listed above. So, assume that an estate has a total of $10,000. The burial and funeral expenses add up to $5,000, leaving $5,000 left. The court allows $2,000 for family expenses and $2,000 for past-due tax payments. The decedent also has $15,000 in credit card debt. While the estate may be able to pay $1,000 from the estate to cover part of the credit card debt, the credit card debt will not be paid in full. At that point, the creditors have to swallow the loss.
If a decedent had secured debts at the time of their passing, anyone inheriting assets tied to those debts will need to handle those debts to avoid seizure of the assets. For example, if someone is given the decedent’s home, they can’t just say that the mortgage debt goes away in the decedent’s absence and keep the home free and clear. The creditor does then have the right to seize the home.
Concerned About Probate? Call Entz Burton & Associates Estate Planning Law Firm
As you can see, the probate process can be incredibly complex, particularly when multiple debts are involved. Bringing in a probate attorney can help you work through this process without risking costly mistakes. Get started today by calling us at 405-773-9800 to set up a consultation.
Attorney J. Michael Entz at Entz Burton & Associates is an experience lawyer in estate planning law, business formation and asset protection serving the families in Oklahoma City and Weatherford office.
