A fiduciary is a general term for an individual who is appointed under a trust (specifically, a Trustee) or a will (specifically, a Personal Representative or an Executor), to administer the estate of a person who has died. Unless there is a valid objection, the person named in the estate plan will be the fiduciary. He or she must ensure that the decedent’s desires written in the estate plan are carried out. Some of the practical responsibilities are things like collecting and protecting the assets of the trust or estate, obtaining contact information on all beneficiaries named in the estate plan and any other potential heirs, collecting and arranging for payment of debts of the estate, approving or disapproving creditor's claims, making sure estate taxes are calculated, forms are filed and tax payments are made.
The fiduciary is required to gather the assets of the estate and pay the deceased person's debts before assets are distributed to the beneficiaries of the estate. This includes credit card debt. This can be made much easier by hiring an attorney for the estate (which the fiduciary can select).
As an example, under New Jersey law, if the assets aren’t enough to pay all of the claims against the estate, payment must be made in the following order:
- Reasonable funeral expenses.
- Estate administration expenses.
- Reasonable services rendered to the deceased person by the state office of the public guardian for elderly adults.
- Debts and taxes with preference under federal or state law.
- Reasonable medical and hospital expenses of the deceased person's last illness, including compensation for those attending that person.
- Judgments entered against the deceased person.
- All other claims.
In some states, like New Jersey, creditors must present their claims to the fiduciary in writing and under oath, within nine months of the decedent’s death. Other states, like Virginia, have a shorter timeframe in which claims must be made. If a claim isn’t presented within that time, the fiduciary won’t be liable to the creditor for any assets which may have been paid to other claimants or distributed to beneficiaries. The fiduciary has three months from the time he or she is presented with a claim, to dispute it by giving written notice. The creditor will then have three months after receiving notice of the dispute, to file a lawsuit against the fiduciary.
Reference: nj.com (June 5, 2018) “What happens if executor doesn't pay off dead person's debt?”