Is an executor of an estate responsible for paying off credit card debt?

Estate Credit Card DebtDear Liz: I was concerned about something you wrote recently about the responsibilities of an executor — that he or she can be held personally responsible for settling an estate. I am listed as executor of my mother’s estate. She lives with my sister, has no assets other than a car she owes money on and an $11,000 credit card debt. Would I have to pay this balance if she dies owing it?

Answer: You misunderstood. An executor can be held personally responsible for mistakes made in settling an estate. But if you follow the procedures laid out by your state’s probate court, you shouldn’t have a problem.

When your mother dies, you’ll be required to make an inventory of her assets (the car) and her debts (the car loan and the credit card balance). Any assets must first be used to pay her creditors, with the order determined by state law. If her car loan is worth less than her car, for example, the car typically would be sold, the car loan paid off and any remaining equity used first to pay the costs of settling her estate and her funeral expenses.If there’s money left over, it would be used to pay as much as possible of the credit card balance (assuming there are no other debts that would take priority, such as federal or state tax debt).

If there isn’t any money left to pay creditors, on the other hand, you simply inform them of that fact and they have to write off the balance as bad debt.You aren’t personally responsible for paying your mother’s debts, unless you cosigned on a loan or are a joint account holder on a credit card.

Where you might run into trouble is if you ignore your state’s laws, sell the car and pocket the difference or distribute it to other heirs. You also run into trouble by paying one creditor ahead of another in violation of state law.  Because you can be held personally responsible for mistakes made in settling the estate, it would be smart to get an attorney’s help.

Liz Weston is “The most-read personal finance columnist on the Internet” (Nielsen/NetRatings) and author of “The 10 Commandments of Money” and “Your Credit Score.”