New Jersey’s probate statutes require an estate’s executor to notify the deceased’s heirs and all reasonably known creditors. A valid will that lists the deceased‘s heirs may, for example, also require recent billing statements for the estate’s executor to refer to.
The estate may face claims from unpaid creditors within nine months of the date of death. As noted by Experian, secured and unsecured debts may get paid from the estate’s assets.
Differences between secured and unsecured debts
Secured debts typically include collateralized car loans and mortgages. If an estate cannot pay off the balances, secured creditors may file claims to take back their property. Some executors, for example, may negotiate with mortgage lenders to refinance loans. An executor could also sell the property and pay off the debt. The remaining funds from the sale may go to the heirs.
Unsecured debts include student loans and credit cards. As noted on the studentaid.gov website, the government may discharge loan balances after receiving notice of the death. Balances remaining on jointly owned credit card accounts, however, may become the responsibility of the surviving account owner.
Planning to protect assets from creditors
Planning for the future may include preparing for the possibility that an estate may not have enough assets to cover unpaid debts. As noted by Experian, however, creditors generally cannot access the deceased’s brokerage or retirement accounts and life insurance policies. Considering which assets may go toward paying debts may influence a will or trust’s instructions.
As described on the IRS.gov website, an executor’s duties include gathering the deceased’s assets, filing tax returns and paying creditors. The executor may then distribute the remaining assets to the deceased’s heirs.