Um, no. A will doesn't magically make a debt go away upon the death of the debtor.
Secured creditors will get in line first. Are heirs secured creditors? Nope.
The estate takes care of debts first, then remaining assets are dispersed to the heirs.
ok, this has confused me a bit.
So this is how I understand it -
Im going to use a house for an example.--
IF- lets say MIL wills her HOUSE to Ian, she dies, the creditors will step up, sieze the house, sell it, then give what ever is left over and above the outstanding DEBT to Ian?
If the bank breaks even with what is left of the loan, they do nothing.
If they can not sell the house for what is owed on it, they just swallow the cost? They dont come after the person who it is willed to?
In the case of my aunt --
If she has a house and didnt will it to ANYONE, didnt have a cosigner, it would be siezed by the bank who held the loan,sold for what ever was owed?
The bank doesnt come after anyone for anything that may be owed, and if there is left over, they can use that to apply to other outstanding debt?
( whew...there is a f--k of a lot more to this then i thought..)
OK. Here's how I understand it.... I could be wrong.
When a person dies, the estate is handled either by the executor of the will or, if there is no will or the will is deemed to be invalid, by someone in charge of the probate process.
The estate is responsible for paying off debts. Assets may need to be sold to cover the debts. The creditors do not sell the property, the executor or the probate officer do so.
If assets exceed debts, then any assets that remain after debts are taken care of are then disbursed according to the will or the laws of the state.
If debts exceed assets, then secured creditors get first dibs on any assets available. Once the secured creditors are satisfied, the remaining assets, if any, are divided among the unsecure creditors.
This ignores odd cases, such as performers (think Elvis) where the estate continues to be paid for song royalties and such.
Any mistakes are purely my own; someone tell me where I've gone wrong.
That's my understanding as well, DD.
Bingo, DD. The person who administers an estate if there is no will is called - ta da! - the administrator (or administratrix if they are female). You don't need special training or a law degree, you just get appointed by the probate court. My mother was the administratrix of her uncle's estate. She had to sell his primary asset (a summer camp in upstate New York) to pay off his debts. Whatever was leftover was divided among the heirs. She, for her services, was entitled to a fee, can't recall how much it was for.
"Who is legally responsible for a dead persons bills?"
I didn't quite understand your main query but just your question. It has to be the dead person who is responsible for his bills. So any property in his name should be used to pay his bills and no other. I don't know, that's what I think should happen.
I've been worrying about this problem with another wrinkle.
Mr. Noddy is personal and financial guardian for a mentally ill member of his family.
Last summer this woman's daughter cleaned out her small checking account, money we had saved from the woman's Social Security Check. We're talking about $1100 here.
Daughter, while disclaiming any knowledge of the missing money, will be paying back the missing money
This woman's only income is Social Security.
She owes $900 dollars to a local hospital--deductable on her medigap insurance.
Her health is very poor. She's 5'5" and weighs 86 pounds. She needs to inhale oxygen to cross the room.
If she dies without having paid the hospital bills, is Mr. Noddy (as her personal and financial guardian) personally responsible for her bills?
If there are funds with Mr. Noddy in the account that he looks after for the lady, yes, he should pay the bills with that money, otherwise no he's not responsible because he's only the guardian of her and her finances and not liable for paying her bills from his own.
