Probate Lawyer Answers: What Happens to Unpaid Bills in Probate?

Any probate lawyer will tell you that the time to formalize your final wishes and get your affairs in order is now. After all, none of us knows what tomorrow will bring.

Few of us can take care of everything in advance. For example, many Nevada residents wonder what happens during the probate process, whether it can be avoided altogether, and what happens to unpaid bills that are left behind.

Many of these questions can be addressed by an experienced probate attorney in Las Vegas, but here’s an overview that will give you some points of reference before you meet with your lawyer.

What Is Probate?

Probate is a legal process that was set in place to administer estates after death. The purpose of probate is to ensure that:

* Property and other assets are transferred and distributed to all legal heirs

* Debts are properly discharged

That includes taxes and unpaid bills that aren’t automatically settled by decree as soon as a death is registered. For example, federal taxes may be owed on bequests or gifts over a certain dollar amount. Other debts may be payable by the estate, and you can be sure that any creditors will be present at probate looking for their share.

How Does Probate Work?

The process of probate was created to ensure that estate matters are handled in a timely manner, that debts are discharged according to law, and that any disputes are settled fast and equitably. Although the particulars can vary from state to state, there is a general hierarchy of importance for outstanding debts during the probate process.

For example, funeral expenses take precedence over other financial obligations, followed by probate costs and administrative fees, and then taxes. In some cases, states include any medical bills or end-of-life care not covered by insurance as debts that must be settled by the estate. Disbursements by the state, such as Medicaid benefits, may be subject to reimbursement by the estate as well.

All of that, and any other bills that are ordered to be discharged during probate, will come out of the value of the estate. Whatever is left is divided and distributed according to the terms of the will.

If the deceased dies intestate, meaning they didn’t leave a will, all matters of debt settlement and transfer of remaining assets will be determined by a judge in a probate court proceeding. Likewise, any disputes over the terms of the will or petitions by creditors for relief will be handled by a judge.

However, any party to the probate case can have their own legal representation, including executors, family members, and creditors.

In these cases, a probate lawyer in Las Vegas or jurisdiction of record in Nevada will argue on behalf of creditors or family members. Most of the time, creditors will simply have to write off unsecured debt that isn’t medical in nature, such as credit card debt.

Excluded from probate are life insurance payouts, qualified retirement accounts, assets placed in a trust, and jointly held, titled assets. The first two will pass directly to the beneficiaries outside of probate. Trusts will be managed according to the terms set forth when they were created by the estate planning lawyer.

Joint assets, such as houses, personal property, or bank accounts that are specified with the right of survivorship go to the person named in the will, listed on the deed, or granted such rights under the terms of the account.

The exception to this is in states that have community property laws. In those states, debts are considered as equally as assets, meaning that there may be a joint liability by the surviving spouse for certain dents regardless of who incurred them or whose name is on the title.

Nevada is a community property state. However, legal liability is only placed with the surviving spouse. Children are never legally liable for the dents of the parents unless they co-signed to take out a loan or purchase an asset. Likewise, legal representatives and executors are not held liable for a decedent’s unpaid bills.

What Happens if There Isn’t Enough Money to Cover Debts?

In cases where the estate isn’t large enough to cover all liabilities but wasn’t small enough to avoid probate under the small estate statute, the court will take whatever assets are available and apply them to outstanding debts in the order of priority outlined above. The probate attorney, executor, or heirs could also work out a prorated amount or payment plan to discharge other qualified debts.

How to Avoid Debt During Probate

In the state of Nevada, creditors have 90 days from the time that a death is registered to stake a claim against an estate. However, the claim must be for an obligation that isn’t automatically voided by death, and the estate must be valued higher than $200,000.

The best way to avoid leaving unpaid bills behind when you die is to work with a licensed estate planning attorney in Las Vegas. They will help you to create a strategy to minimize your risks and legally protect your assets. For example, placing certain assets into a trust will help them avoid the oversight of probate court.

Bear in mind that any assets that aren’t protected could still be ordered sold to satisfy debts after your death. Your surviving spouse could also be held liable for unpaid bills.

Before choosing an attorney, you should make sure to consult with one who is licensed in the state of Nevada. They should also have deep experience in estate planning as well as knowledge of probate matters.

When You Need a Probate Lawyer

Although not quite as complicated as something like establishing guardianship in Las Vegas, probate does include several steps that must be followed to properly administer an estate.

Fortunately, most final estate matters can be managed without the advice of a probate lawyer, especially if the terms are fairly cut and dried and the paperwork was completed and filed on time.

However, it’s a good idea for executors to obtain legal guidance if:

* There is some dispute about the terms or legality of the will

* Family members are at odds over bequests

* The estate doesn’t qualify to bypass probate

* The assets aren’t adequate to cover debts and tax liabilities

* The estate is large, complex, or includes property

No one wants to leave their family in debt. The time to minimize risk is now, and your plans should be updated every time there’s a major change in your life circumstances.