48 LONGISLANDPRESS.COM • FEBRUARY 2018 48 LONGISLANDPRESS.COM • SEPTEMBER 2017 48 LONGISLANDPRESS.CO M • SEPTEMBER 201-----------TUTU111
What Happens to One’s Debt on Death?
The main purpose of a last will
and testament is to direct how
an individual’s assets shall
be distributed after he/she dies.
Nonetheless, a last will can also be
used for other purposes. Through a
will, a person (‘testator”) can provide
instructions as to how his/her
debts should be paid and disposed
of. Typically, a beneficiary or heir
cannot inherit another person’s
debt, but if a person dies with debt,
it ultimately reduces the amount
that each beneficiary receives.
Articulating and clearly delineating
how the debt of one’s estate should
be paid is ultimately very helpful to
the various beneficiaries.
If a person dies (the “decedent”)
with outstanding debt, the executor
appointed in the will is responsible
for making sure those debts are
paid. Paying off a decedent’s debt
may require the executor to sell
off some of the assets held by the
estate and the decedent may have
intended to specifically leave such
assets to designated beneficiaries.
There are two types of debts that a
person can leave behind:
• "Secured Debt" is debt that is
attached to a piece of property or
an asset, such as a car loan or a
mortgage. If the debt is not paid off,
the lender can ultimately pursue the
actual asset in order to be made
whole; and
• "Unsecured Debt" is any debt
that is not backed by an underlying
asset, such as credit card debt or
medical bills.
If a person owns an asset that is
subject to debt and leaves such asset
to beneficiaries, the debt remains
with the property. The beneficiary
can then decide whether to continue
to actually pay off the debt or sell
the property to pay off whatever
is outstanding. If a person believes
that an inheritance encumbered by
debt would cause a burden for his/
her heirs, language can be added
to the will to specifically address
these concerns.
If, for example, the estate is
comprised of real property, the
testator can designate that one
specific property be sold in order
to pay off any debt attached to
other properties. In the alternative,
the testator can indicate that each
beneficiary is responsible for any
debt attached to the property
received. By clearly instructing
how debt should be handled, the
testator can avoid any bad feeling
or misunderstandings upon his
demise (and the testator can also
avoid costly litigation). Instructions
regarding the handling of a
decedent’s debt should be included
as to allow for a peaceful and
uneventful distribution of assets.
Ronald A. Fatoullah, Esq. is the
principal of Ronald Fatoullah &
Associates, a law firm that concentrates
in elder law, estate planning, Medicaid
planning, guardianships, estate
administration, trusts, wills, and real
estate. The law firm can be reached
at 718-261-1700, 516-466-4422, or
toll free at 1-877-ELDER-LAW or
1-877-ESTATES. Mr. Fatoullah is also
a partner with Advice Period, a wealth
management firm, and he can be reached
at 424-256-7273.
By Ronald A. Fatoullah, Esq
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