How are debts handled in an estate?
Question Details: Uncle dies. Next of kin discovers uncle owed the IRS $30K in back taxes. Uncle left behind a total of $5K. Does the IRS get that $5K (i.e. are they first in line)? If yes, once the $5K is paid to the IRS, does the remaining $25K still have to be paid?
When a loved one dies, the estate of the decedent (meaning, the person who died) is responsible to pay the debts left by the decedent. It is a common misconception that ‘debt dies with the debtor’. A debt owed for taxes is a priority debt. In the event that the decedent’s estate is insolvent, heirs have no personal responsibility or personal liability to pay the debts of the decedent from their own money. I have seen certain situations in which a debt was ‘arguable’ in nature but the heirs chose to repay the debt because it was ‘the right thing to do’.
