Most people want to make sure their families are taken care of once they pass away. However, in the event of prolonged illness or long term care, that goal may not be possible to achieve. Medical expenses and long term care can reduce the value of an estate very quickly. Heirs and family members may wonder who is responsible for the payment of debts after death. The answer may depend upon the status of the estate once the decedent has passed.
A solvent estate is one that has enough assets to pay off all of the debt of the decedent. The estate representative will pay off all of the debts using the assets of the estate. For example, if the estate is worth $500,000.00 and the debts add up to $200,000.00, after the debts are satisfied, the estate would then be worth $300,000.00. If the decedent has left a Last Will and Testament, the remaining monies would then be given to the people that were named therein.
An insolvent estate results when the decedent left more debts than assets. For example, if the final debt amounts to $100,000.00 and there is only $50,000.00 in the estate, the estate is considered insolvent. In this case, the representative would then have to prioritize the payment of the bills based on state law. There may be creditors that will be paid in full while others may receive a partial payment or none at all.
The Bottom Line
In the case of an insolvent estate, there will be no monies that will be paid out to those named as beneficiaries in the Last Will and Testament. The beneficiaries or heirs to the estate will not be responsible for payment of these debts unless one of them was contractually obligated. For example, if the heir was a co-signer or guaranteed payment of the debt, they may be liable for the debt. If you have questions regarding the planning of your estate or the impact that debt may have upon your estate plan, an experienced Illinois estate planning attorney can assist you.