Can you pay my bills? Can you pay my telephone bills? Do you pay my automobile bills? If you did then maybe we could chill.
Okay, so maybe we are not concerned about a boyfriend taking advantage of us like Beyoncé. However, the question of who will pay your bills when you pass away is a valid question and one that is determined based on the solvency of your estate when you pass away.
If you die and your medical and credit card bills start piling up it is important to understand who will be responsible for paying off all of these debts and in what amounts. The answer will depend on whether the estate of the decedent is solvent or insolvent.
What is a Solvent Estate?
A solvent estate is one that has enough assets to pay off the decedent's bills. This essentially means, the value of all the decedent's individual assets exceeds the amount of bills owed. If the estate is determined to be solvent, then the Personal Representative of the decedent's estate will be responsible for paying all of the bills from the assets owned by the estate. So basically, if there is money to pay the bills, the bills will be paid.
If all of the decedent's individual assets equal $50,000 and the credit card and medical bills equal $25,000, then the decedent's estate is solvent and can be used by the Personal Representative to pay the bills in full and the remaining $25,000 will be paid to the beneficiaries named in the Last Will and Testament or Living Trust (if there are estate planning documents prepared). If no estate planning documents are in place, the decedent's heirs at law will receive based off Florida Statute.
What is an Insolvent Estate?
An insolvent estate is one that does not have enough assets to pay off the decedent's bills. So when you add up all the assets, the value of the decedent's individual assets is equal to or less than the amount of bills owed. If the estate is insolvent, then the Personal Representative will need to prioritize payment of the bills as provided by Florida law.
If the decedent's individual assets equal $50,000 but the credit card and medical bills equal $100,000, then the deceased person's estate is insolvent by $50,000. The Personal Representative will need to look to Florida law to determine which creditors will get paid in full, which creditors will receive only a partial payment, and which creditors will get absolutely nothing.
There are different classes of creditors and depending on where that creditor ranks will depend on if they get paid in full, partial payment or no payment.
For instance, medical bills incurred within 60 days of the decedent's date of death will get paid before a credit card company gets paid. If there are not enoughassets to pay the credit card company, they will only receive a proportionate share and the remainder will have to be written off by the credit card company.
In an insolvent estate, the decedent's beneficiaries will end up getting nothing. The good news is, that they will not be responsible for paying the balance of the decedent's unpaid debts (unless a beneficiary was a co-signor or co-guarantor on the debt). The creditors that were not paid in full will simply have to write off the bad debt.
Debt collectors are very creative and persuasive. Even if you are not responsible for the debt, they may use terms such as ‘moral responsibility’ and use guilt to make family members feel they have to pay debts.
BEWARE: Creditors always come before beneficiaries. That is why it is extremely important to protect your assets and start estate planning today!
If you live in Miami-Dade, Broward, or Palm Beach County contact an experienced estate-planning and probate attorney at The Hershey Law Firm, in Fort Lauderdale, Florida, at (954) 303-9468 to discuss your estate planning needs.
You Can't Predict The Future But You Can Plan For It.