Assets standing in your mother-in-law's name alone are subject to the jurisdiction of the probate court. Creditors have a right to file claims against these assets, Most states have statutes that give different priorities to claims against the estate of a deceased person. Example: In Illinois where I practice, funeral bills are a first class claim, meaning if there is not enough money to pay all claimants, funeral bills will get paid in full before lower class creditors, like credit card companies, utility bills and so forth. The person responsible for collecting your mother-in-law's assets under the Court's supervision will also have the responsibility for paying bills until the estate's money runs out. No one has personal liability for payment of these claims.
Generally speaking accounts and investments which are in joint tenancy are not subject to the claims of creditors, nor are assets, like insurance policies and retirement plans, which are payable to named beneficiaries. Some bank account and other investments have "TOD" (Transfer on Death) registration, and, again speaking generally, these assets are not subject to the claims of creditors.
Some bills are payable by more than one person. Example: credit card issued to husband and wife, with both persons having applied for the card. These bills generally are payable by either person who applied for the credit, so if your mother-in-law had a card with another person, and your mother-in-law's estate is unable to pay (or even if it is able to pay) the other person can be held responsible and made to pay the entire bill. Concern: often when people enter hospitals, rehab facilities and the like, other people are required to guarantee payment of the bill(s). This is a method used by creditors, including care providers, to assure themselves of payment where the estate is insufficient.
Mortgages and debts which create liens (car payments for example) are also claims against both the property which secures the indebtedness and the people who signed for the credit.
There are many situations where the estate is not large enough to pay claims, and no other person has made himself or herself responsible, in which the creditor is unable to collect at all.
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If debts exceed assets then some of the debt would be uncollectible by the creditors. Beneficiaries are not responsible for such debts, but debts must be paid before any beneficiaries are paid.
For an example of which debts need to paid and in what priority please see my article entitled Pennsylvania Probate: What Debts Take Priority at the following link: http://www.sjfpc.com/pa_probate_law_section_3392_estate_debt_priorities.html. Although this relates to PA law, in most states this is what needs to be done before beneficiaries can be paid.
Hope this helps.
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Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is [email protected] , his website for more tax, estate and business articles is www.sjfpc.com. and his blog is
LEGAL DISCLAIMER Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is [email protected] , his website is www.sjfpc.com. and his blog is <http://frommtaxes.wordpress.com/> Mr. Fromm is ethically required to state that the response herein is not legal advice and does not create an attorney/ client relationship. Also, there are no recognized legal specialties under Pennsylvania law. Any references to a trust, estate or tax lawyer refer only to the fact that Mr. Fromm limits his practice to these areas of the law. These responses are only in the form of legal education and are intended to only provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that if known could significantly change the reply or make such reply unsuitable. Mr. Fromm strongly advises the questioner to confer with an attorney in their state in order to ensure proper advice is received. By using this site you understand and agree that there is no attorney client relationship or confidentiality between you and the attorney responding. This site should not be used as a substitute for competent legal advice from a licensed attorney that practices in the subject area in your jurisdiction, who is familiar with your specific facts and all of the circumstances and with whom you have an attorney client relationship. The law changes frequently and varies from jurisdiction to jurisdiction. The information and materials provided are general in nature, and may not apply to a specific factual or legal circumstance described in the question or omitted from the question. Circular 230 Disclaimer - Any information in this comment may not be used to eliminate or reduce penalties by the IRS or any other governmental agency.
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