If your loved one has died and the medical and credit card bills have started piling up, then you'll need to understand who will be responsible for paying off all of these debts and in what amounts. The answer depends on whether the estate of the decedent is solvent or insolvent.
What is a Solvent Estate?
A solvent estate is one that has enough assets to pay off the decedent's bills. In other words, when added up, the value of all of the decedent's individual assets exceeds the amount of bills owed. If the estate is solvent, then the Personal Representative of the decedent's estate will be responsible for paying all of the bills from the assets owned by the estate.
For example, if all of the decedent's individual assets equal $100,000 and the credit card and medical bills equal $50,000, then the decedent's estate is solvent and can be used by the Personal Representative to pay the bills in full and what's left - in this example, $50,000 - will go to the decedent's beneficiaries named in his or her Last Will and Testament or Revocable Living Trust if the decedent had an estate plan, or to the decedent's heirs at law if the decedent didn't have an estate plan.
What is an Insolvent Estate?
An insolvent estate is one that doesn't have enough assets to pay off all of the decedent's bills. In other words, when added up, the value of all of the decedent's individual assets is equal to or less than the amount of bills owed. If the estate is insolvent, then the Personal Representative will need to prioritize payment of the bills as provided by federal law and the laws of the state where the decedent died.
For example, if all of the decedent's individual assets equal $100,000 but the credit card and medical bills equal $150,000, then the deceased person's estate is insolvent in the amount of $50,000. In this situation, the Personal Representative will need to look to state and federal laws to determine which creditors will get paid in full, which creditors will receive only a partial payment, and which creditors will get absolutely nothing.
Using the example above, if the decedent's medical bills total $50,000 of the total debt and were incurred within 60 days of the decedent's date of death and the credit card bills equal the remaining $100,000 of the decedent's debt, then in Florida the Personal Representative will pay the medical bills in full and the credit card companies will have to proportionately share in the remaining $50,000 of the decedent's assets.
Unfortunately, in an insolvent estate the decedent's beneficiaries named in his or her estate plan, or the heirs at law if the decedent didn't have an estate plan, will get nothing. But fortunately the beneficiaries or heirs at law won't be responsible for paying off the balance of the decedent's unpaid debts (unless the beneficiary or heir at law was a co-signor or co-guarantor on the debt) - the companies that weren't paid in full will simply have to write off the bad debt.