Responsibility for your debts when you die

Is my executor or trustee responsible for my credit line loan at the bank after I die? There are no funds in my estate and no insurance on the loan.

In general, executors and trustees are not personally responsible for the debts and liabilities of the decedent. However, there are a couple of exceptions to this that I will explain in greater detail later in this posting. In terms of the debts and liabilities of an estate, the role of the executor or trustee is to make sure that legitimate debts and claims are paid from the decedent's assets. If the estate does not have enough assets to pay all of the outstanding debts, it is likely that some creditors may not get paid. State laws determine which debts will get paid and in what order. Debts such as funeral expenses, legal fees, and court fees are considered high priority debts and are usually paid off first. Outstanding credit card balances and other similar debts are usually considered a lower priority and are paid after the higher priority debts are paid in full. Debts and loans that are secured by property such as mortgages and car loans are usually the responsibility of those who inherit the property. If the property is sold rather than inherited, the debt associated with that property is usually paid with the proceeds from the sale of the property.

Earlier I mentioned that an executor or trustee is not usually responsible for the debts of the decedent. However, there are exceptions to this. An executor or trustee may be personally responsible for the debts and liabilities of a decedent if he/she is the decedent's surviving spouse or if he/she causes the estate to lose money due to his/her mismanagement or dishonesty.

Depending on the property ownership laws in your state and the type of the debt outstanding, the surviving spouse may be liable for the debts of his/her deceased spouse. For example, debts that were incurred together such as jointly held credit cards may become the sole responsibility of the surviving spouse once one of them dies.

An executor or trustee has an obligation to act in the best interest of the decedent's estate. Therefore, if the executor or trustee causes the estate to lose money due to their dishonesty or mismanagement, the executor or trustee may be held financially responsible for those losses.

Due to the unique nature of each person's financial situation and the differences in state laws, it would be a good idea to consult with an attorney if you have any questions about how your outstanding debts will be paid upon your death.