Massachusetts residents who die with unpaid debts may have them settled through their estates. The personal representative that you name in your will becomes responsible for filing your documents with the probate court and distributing your assets after your death.
Under the Bay State’s laws, creditors may file claims through the probate court to recover unsatisfied debts within one year of your death. Your representative may use or sell your estate’s assets to pay the amounts owed for successful claims.
Personal representatives may classify claims by priority
As noted on the Commonwealth of Massachusetts website, personal representatives may pay debts and distribute assets under the statute governing the classification of claims. Representatives overseeing estates with insufficient funds may prioritize payments by first using the estate’s assets to cover the expenses and costs of probate.
An estate’s property may then go toward paying for the deceased’s funeral expenses followed by outstanding federal taxes or debts. If the deceased required hospitalization for his or her final illness, representatives may use the estate’s assets to pay those expenses. Debts or taxes owed to the State of Massachusetts then take priority over other claims.
Individuals may include assets to cover unexpected debts
Forbes reports that individuals may use life insurance policies to help heirs pay expenses after death. Many policies offer payable-on-death benefits that heirs may use to pay off jointly-owned debts. The funds may also go toward paying mortgages that heirs may have incurred sole liability for. The government generally discharges unpaid federal student loans when presented with a death certificate.
Issues involving unpaid credit card debts, car loans or other obligations may resolve through the probate procedure. Your will may instruct your personal representative on how to prioritize the assets used to pay creditors filing claims.