What happens to the decedent’s debts?
I am often asked, what about the debts of the decedent? Does death wipe the slate clean? After all, the heirs are not the debtor.
The debts of the decedent are enforceable against the estate, if there is a probate. If the decedent died with a trust the debts are also enforceable against the trust.
A typical clause in a trust states: “Upon the death of the Settlor, claims allowable against the deceased Settlor’s estate shall be paid from the trust estate by the trustee.”
A better policy is to make the payments of debts discretionary. Instead of “shall” we use “may” to wit:
“My Trustee may pay from the trust property legally enforceable claims against me or my estate.”
This gives the Trustee the authority to dispute or settle claims.