In Alberta, the Estate assets must be used to pay any outstanding funeral expenses, burial expenses, taxes, credit cards or other debt. Distributions to beneficiaries cannot be done until all debts are paid.
What happens if there are not enough assets in the estate to cover the debts?
Only the Estate is responsible for the debt. If there is a shortfall, the Executor cannot be forced to pay any of the debts out of their own pocket, unless their actions have created the inability to pay the debt.
Likewise, beneficiaries or family members are not liable for debts. The only time the beneficiaries or family members can be liable is where they have improperly removed assets from the Estate. Even then, their liability only extends to the value of the property removed from the Estate. In certain very limited circumstances where the Executor has acted in a negligent, careless or fraudulent manner, they can be held personally liable. In summary, the majority of the liability rests with the Estate and assets which can be traced to other people.
Where debts remain unpaid even after liquidation of assets, some creditors will be left high and dry. These debts may not be paid in full and the deceased person may ruin their credit rating. Of course, this is a non-issue once they are deceased. This can be a complex area and certain debts may have priority over other debts. This is where you need the assistance of an experienced lawyer.
The Executor can be personally liable where assets have been distributed to beneficiaries and all the claims or debts have not been paid. This can include debts or claims that are not even known until after distribution to beneficiaries. For this reason, we highly recommend placing an ad in the local newspaper with a notice to all creditors and claimants providing them with a deadline for submitting their claim. Any claims arising after the deadline must still be paid out of estate assets. However, if the Estate has been distributed the PR is no longer personally liable. If this ad is not placed in the paper then the executor may be personally liable for this debt.
If you have any further questions about Executor liability, contact our office for a consultation with one of our experienced lawyers. Remember, we are here to help.