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When an estate has no assets or is underwater

It is an optimal case for estate administrators and heirs, of course, when a wealth creator passes while leaving behind significant assets that are well protected and in a smartly crafted estate plan. That ideal scenario allows for inheritances and a related passage of property precisely in keeping with a drafter's wishes.

It is not always the case, though, for such a scenario to flow when the time comes to settle an estate. In many instances, assets are in short supply. Sometimes there is nothing on the plus side at all, with only accumulated debt on display.

What happens then? Are heirs -- especially adult children -- on the hook for monies that are owed to various creditors?

We suspect that many of our California readers already know the answer to that query that can be safely stated in most instances.

It is "no," but with a caveat attached.

Here's a quick nutshell take on the matter. When a person dies, his or her estate takes on any debt that exists. A recent financial article discussing debt outcomes for underwater estates notes that, while a surviving spouse might in some instances bear a repayment duty, other family survivors "usually don't have to pay what's owed." They might have a repayment duty, though, if at an earlier time they agreed to assume debt obligations as a co-signer.

Related questions should be directed to a proven estate administration attorney, who can examine matters from a state law perspective and with a close eye on the particular facts at hand. Some assets pass directly to heirs without any corresponding duty to pay estate debts, while questions might arise in certain instances.

The above article stresses that, notwithstanding any ambiguity or complexity attaching to estate debt before an heir has the opportunity to candidly speak with experienced legal counsel, there is one admonition that rings clear and unequivocal.

And that is this: "You shouldn't believe what debt collectors tell you."

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