How To Distribute Assets and Handle Debts After a Loved One Passes Away

When someone passes away, we typically see one of two situations happen. Someone who was forward-thinking will typically have sat down with an attorney at some point to draft a will and other estate planning documents, while others, whether they believed they were too young or didn’t have enough assets to do so, perhaps will have not yet done this. Not having a will drafted poses some potential problems, with the most pronounced issue being how to distribute assets and handle debts after a loved one passes away. 

Below, our firm, David E. Anderson, PLLC, will share more about how having a will allows you to remain in control over the distribution of your estate proceeds when you pass away and compare that with what happens if you die intestate, meaning without you having documented your wishes in a will.

Drafting a Will To Document Your Wishes

A last will and testament, also simply known as “a will,” is a document in which you can outline your final wishes, which may include:

  • Who you want to serve as a guardian to your minor children when you’re gone, and who you may want to manage any assets you leave behind to them (if different from your appointed guardian)
  • Which property or assets (like social media or bank accounts) you have, and who you want to inherit them, whether they’re family members, friends, charities, or others
  • You can appoint an executor of your estate, who is the person who will file your will with the local county probate court, inventory and preserve your assets, settle up with your creditors, file your final tax return, and distribute any estate proceeds to your intended heirs upon your death

So, as you can likely tell, while the handling of your outstanding debts and distribution of your property is already arranged for if you have a will, that’s not the case with individuals who die before drafting this crucial legal document.

What Happens With Debt Obligations and Property Distribution if You Die Without a Will

Remember the word “intestate” that we used earlier in this piece? It refers to someone dying without having a will in place. When individuals die in NC without a will, the probate court in the county where the decedent previously lived appoints an estate administrator to perform the same responsibilities we outlined above that a testator’s (will writer’s) self-appointed executor is obligated to carry out. Those include: 

  • Letting potential heirs know of the decedent’s passing
  • Taking an inventory of the deceased’s assets
  • Paying the funeral and burial bill
  • Notifying creditors of that individual’s passing and bringing any outstanding debts current 
  • Paying any taxes due

Only once all this has occurred can the estate administrator finally move to dividing up any remaining money or assets that the estate holds.  

When a decedent didn’t have a will drafted, our state’s general statutes contain an intestacy law, codified as G.S.§ 29, which outlines who inherits a deceased individual’s assets. The North Carolina Intestate Succession Act describes the order or inheritance of family members in these instances as follows based on the types of close family members the decedent left behind:

  • Just parents, no children or spouse: Estate proceeds are equally divided between parents, or if only one is surviving, then the entire estate goes to that one
  • Surviving parents and a spouse, but no children: A husband or wife could inherit the first $100,000 in personal property, then both the spouse and the parents would each be entitled to one-half of the rest as well as one-half real estate interests
  • Only a surviving spouse, no living parents or children:  A husband or wife is entitled to receive all inheritable assets
  • Only surviving children but no spouse: The decedent’s assets would be split equally between the kids
  • A spouse and single child are left behind: A husband or wife would be entitled to the first $60,000 of personal property a decedent left behind, with one-half of any remaining property and one-half of real estate going to each the spouse and child
  • A surviving spouse and more than one child: A husband or wife would receive the first $60,000 of the decedent’s personal property, and the spouse would receive 1/3 the remaining property and real estate, whereas the kids would inherit two-thirds of these assets, equally distributed between them
  • No surviving children, no spouse, and no parents: More distant relatives, like brothers and sisters, grandparents, aunts and uncles, etc., would be eligible to inherit a decedent’s assets, or if none of those exist, the State of North Carolina would be eligible to receive them

What Happens When a Decedent’s Debts Exceed Their Assets?

A common question our Wilmington estate planning lawyers receive has to do with what happens when a decedent has more outstanding debts than they have assets to cover them. According to the Consumer Financial Protection Bureau, generally, those aren’t passed on to surviving loved ones, but instead, those debts go unpaid. Some exceptions apply, most notably of which:

  • An heir was a joint account holder on a credit card also belonging to the deceased
  • The family member co-signed a loan with the decedent that was in the arrears at the time of their death

Other situations may require you to assume a loved one’s debt, which is why you’ll want to discuss your particular case with an attorney to understand your obligations and rights.

Why Get Help With Drafting a Will and Administering an Estate

If you’re simply performing some fact-finding or studying up on wills to better understand if you need one, the answer is a resounding yes. Plus, while you’re at it, we would recommend that you draft some additional documents like a health care power of attorney and health care directive. All these documents give you control over who inherits what when you’re no longer around instead of letting our state’s laws decide for you. We can help you with all aspects of estate planning listed above, plus more, like funding trusts. 

And, if you or a family member has been appointed as an executor or is otherwise looking for insight into their rights to estate assets during the probate process, we can also provide that guidance. 
Get in contact with our law firm to discuss your estate planning or administration needs with experienced attorneys who promise to always put your best needs first.

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