It’s always painful to lose a parent. You can find yourself struggling to make funeral plans, or figure out what to do with all their belongings. It can be much more difficult to deal with the estate of your parent. This issue can be exacerbated if your parent do not have a will, or if they are in a lot of debt. While you’re not liable for paying off the debt of your parents when they die, the estate left behind to you can be significantly reduced just to clear these debts.
Gather financial records
Once your parent dies, it is best as their child to gather all financial records and document you can find. Ensure the safety of these documents, as they would be needed for settling of the estate. Getting access to your parent’s financial accounts may require proof of death. Often times, it is best you contact your parents’ personal estate planning lawyers.
Contact the estate executor or your parent estate lawyers
If you are named by your parent to handle settlement of the estate then you should contact an executor or estate attorney. An executor is the individual named in a person’s will to take responsibility of managing their estate and disbursing it when the testator passes away. When the testator dies, the executor has to take the will to court for validation because handling someone’s estate has to be legal.
Settle Things in Probate Court
Probate proceedings calls for the validation of a Last Will and all that is stated in the estate document. As soon as an estate decedent dies, the estate executor will step in to ensure the decedent’s estate is shared accordingly as stated by the will. Probate officially begins when the executor file the probate petition to the court. Once the court accepts it, the estate is declared “open”. The court then gives a document known as Letters Testamentary, authorizing the executor to settle the estate.
In the absence of a will, your wishes are not known and there is room for your family to squabble over your property. To avoid this, the court has to conduct probate all the same, invoking your State’s law of intestacy to determine who legally has a share in your estate.
Typically, only probate assets can go into your will. And most states have a threshold for probate. If your estate (the total value of your probate assets) does not surpass the threshold, then probate will not be conducted. The threshold is $30,000 in New York and $20,000 in New Jersey.
Conversely, non-probate assets are assets that do not bare only your name, or have designated beneficiaries.
Non-probate assets include:
- Assets held in trust
- Assets held jointly with rights of survivorship
- Retirement account
- Bank account with transferrable-on-death clause
- Life insurance policy.
These assets pass outside of probate.
Do pay your parents debt
It’s important to bear in mind that you’re not responsible for your parent’s debt after they die, as long as you don’t co-sign the loan with them. Their debts will be compensated by their properties. This means that the proceeds from the sale of their home, car or other possessions will be transferred to the debt. The credit firms would then pay off the remaining debt.
Also, if inheriting a mortgage home from your parent, speak to an estate lawyer who’s familiar with all the state and federal legislation that regulates the matter. Generally, if you inherit the home of your parent and still have a mortgage on it, the lender will not expect you to pay off the mortgage immediately.
Contact insurance companies
You should contact insurance firms and providers. If Medicare was obtained by your parent, the Social Security Administration can terminate the coverage. However, if they have extra Medicare benefits or private health insurance, you will need to contact the plan by calling the phone number on their ID card or statement.
If your parents had life insurance, you are not required to use the money to pay off their debts. It is your own, you inheritance. If there is no designated beneficiary, the insurance will become part of the estate. It can then be used to settle debts before access to the money. Ask your parents to name beneficiaries on their life insurance policies.