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Are beneficiaries obligated to pay decedents loan debt?

Peachtree City, GA |

My father's will states that life insurance should pay debts. Are beneficiaries obligated to pay a decedent's debts of 5K? He has 3K in a bank account. The will has not been filed in court. What happens to money in bank account when no probate?

Attorney Answers 4

  1. To get access to the bank account, you need to probate the will. When a person dies their assets become part of their estate. No one can act for an estate unless they have been appointed by the court as an exeuctor or administrator (where there is no will). Therefore, the only person that can get access to bank accounts, transfer or sell the property of an estate, etc. is the court appointed executor or administrator. It would be wise for you to retain an estates attorney in FL to assist you in this complicated and detailed process of estate administration.
    Each state has a priority list as to who is to be paid and in what order. I am not a GA attorney, but usually debts are at the top of the list and in any event before beneficiaries. As a result the money in the bank must be used to pay the debt.
    The tough question is whether the statement in the will as to the life insurance should control the disposition of such proceeds. Once again, you need to consult with an estates attorny in GA to resolve this issue.

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  2. This answer is not intended to provide you with specific legal advice regarding your situation, or to create any attorney-client relationship.

    Please accept my condolences on the loss of your father. As for your first question, if the life insurance was paid directly to one or more designated individual beneficiaries, and not made payable to your father's estate, then no, in general, the beneficiaries do not have to use the life insurance proceeds to pay your father's debts (unless any beneficiary is personally liable for any of the debts in his or her own right - such as if the debt was a joint debt between that beneficiary and your father). A beneficiary designation generally overrides what the Will says, and if assets such as life insurance proceeds pass to a beneficiary rather than becoming part of the deceased person's probate estate, then those non-probate assets generally do not become subject to the deceased person's debts.

    As for your father's bank account, one question is whether it was subject to any joint ownership or "payable on death" ("POD") designation. If the account was jointly owned by your father and anyone else, the other owner most likely became the owner of the account at your father's death. I assume that it was not a joint account, however, because of your question. If the account was held just in your father's name, but it had a POD designation, then the account became the property of the POD beneficiary, and that person should now be able to take a certified copy of your father's death certificate to the bank and claim the funds. Those funds would then not be part of your father's probate estate, and not subject to his debts. However, if your father was the sole account owner and there was no POD designation, then the bank account is likely now part of your father's probate estate, and someone will need to be appointed as the Executor of the estate under the Will in order to deal with the account. If the account is part of the probate estate, it will become subject to your father's debts.

    If the account is the only significant asset in the probate estate, and the debts outweigh the value of the probate assets, then (if your father was a Georgia resident at his death), his heirs and beneficiaries would have the option of simply not offering the Will for probate and leaving the account alone. If there are other assets in the probate estate, then someone should likely offer the Will for probate. Please note, however, that even if your father's heirs and beneficiaries decide not to offer his Will for probate, Georgia law still requires that the original Will be filed with the Probate Court of the county where your father had his primary residence at the time of his death, for "informational purposes only."

    I suggest that you contact an experienced probate attorney who works in the state where your father had his primary residence. The attorney can help you figure out what assets may be in the probate estate, whether to probate the Will, and what to do once you've decided on a course of action.

  3. Beneficiaries of life insurance policies are not required to use their inheritance to pay debts of an estate. You are required by law to file the will with the probate court. You are not required to probate the will. The money will stay in the account until someone opens an estate. If he truly owns nothing but the $3000, and he owes $5000, you might be better off doing nothing and letting a creditor file to probate the estate if they choose to do so.

  4. It depends on whether or not the life insurance proceeds pass through probate or if they pass by beneficiary designation. If the proceeds pass outside of probate, then the answer is no you do not have to pay all of the bills.

    The bank account will either pass outside of probate due to survivorship laws if there is a joint owner with your father with right of survivorship. If the account is solely in your father's name, then the account will have to be probated. If probated, the debts could be paid out of the probate assets. However, you may have offsetting expenses that take priority over the debts that are left to be paid.

    In all likelihood, you will, at least, need to discuss this matter with a probate attorney in your state.

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