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Am I Responsible For My Deceased Loved One’s Debts?

Jenna K. Meltzer, Esq.
Estate Planning

A common question probate administration attorneys are asked is whether the surviving family members are responsible for the debts of the deceased individual. The short answer is no.

This article will provide a more in-depth answer to this question under Florida law and hopefully provide peace of mind and guidance to those who have recently lost a loved one.

For the purposes of this article, the term “debt” will refer to unsecured debt, and not secured debt. Secured debt uses property as collateral to support the loan; unsecured debt has no collateral attached to it. As an example, a type of unsecured debt would be credit card debt, and a type of secured debt would be a mortgage on your home.

In Florida, when an individual passes away with debt in their individual name, this debt will not necessarily get paid. In a formal probate proceeding, a three-month creditor period takes place. During this three-month period, a notice to creditors runs in a local publication for two consecutive weeks, and all reasonably ascertained creditors of the decedent (the individual who passed away) are formally notified. A creditor then has until the later of the end of the three-month long creditor period or 30 days after they were formally notified (if they were a reasonably ascertained creditor) to file a claim in the decedent’s probate proceeding. If this time expires, and a creditor does not file their claim, they are out of luck, and they will not get paid. In essence, this debt is wiped out. However, just because a creditor files a claim during the valid creditor period doesn’t necessarily mean they will get paid.

If the Personal Representative of the estate or another interested person believes that the filed claim is not valid, on or before the expiration of four months from the first publication of the notice to creditors or within 30 days from the filing of a claim, whichever occurs later, they may file a written objection to the claim. The claimant (the individual or entity filing a claim against the decedent’s estate) then has 30 days from the date of service of an objection within which to bring an independent action upon the claim, or a declaratory action to establish the validity of the claim. If the claimant fails to respond to the objection, the claim expires, and it does not get paid.

However, let’s assume that a creditor does file a claim in your loved one’s estate, and you believe that the claim is valid. You should go ahead and pay it, right? …Not necessarily! The Florida Probate Code lays out the order in which expenses and obligations of an estate are to be paid. Debts and expenses are classified into eight different classes, Class 1 being the expenses and debts of administration that have the highest level of priority and will get paid first, with Class 8 being the expenses and obligations that get paid last.

For example, let’s say that Susie passed away with an estate worth $80,000. Two creditors filed claims in her case. The first creditor to file a claim, during the valid creditor period, is Mastercard, for credit card debt Susie owes in the amount of $30,000. The second creditor to file a claim, during the valid creditor period, is the hospital in which Susie received medical care in the last few weeks of her life, in the amount of $50,000. Additionally, the attorney’s fees and other costs of administration associated with Susie’s probate estate equals $10,000. Now we have a problem. The debts and liabilities of Susie’s estate outweigh its value. Who gets paid and who doesn’t? Normal administrative expenses of a probate estate, such as attorneys’ fees, fall into “Class 1”, and therefore, the $10,000 will be paid first. Even though Mastercard filed a claim before the hospital, they are not the next to get paid. Medical and hospital expenses of the last 60 days of the last illness of the decedent fall into Class 4, whereas credit card debt falls into the last class of creditors to get paid, Class 8. Therefore, the hospital debt of $50,000 will be paid, and $20,000 of Susie’s $30,000 credit card debt will be paid, leaving $10,000 unpaid. What happens to this $10,000 owed to Mastercard, do Susie’s loved ones have to pay it out of their own pockets? No. The debt is simply erased and goes unpaid.
While this explains what happens in an instance where a probate estate is opened for a decedent, it is not always necessary to open a probate at someone’s death. In the case where a probate is not opened for an individual who passes away (and this individual did not have Revocable Trust), most of the time, the debt will never be paid. In an instance where someone passes away and a probate is not opened, creditors have two years to file a claim, a “caveat” with the probate court. Essentially, the filing of this caveat ensures that if a probate is ever opened for the decedent, the claim will be addressed. However, if probate is never opened that claim will never get addressed and therefore never be paid.

The Florida Probate Code has complex rules not only on how creditors are paid but if they are paid at all. Therefore, if you have a loved one who passes away, it is important to talk with an attorney who specializes in probate administration. You can contact probate and estate planning attorney Jenna Kyle Meltzer at 941.748.0100 or jmeltzer@blalockwalters.com.

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