Executors collecting debts of the deceased

One of the many jobs that executors must do on the estate of someone who is deceased, is figure out what debts are owed to the deceaased, and then collect them. I would rank this among the least enjoyable of executor's tasks (not that most of them are a barrel of monkeys, mind you).

Debts owed to the deceased can range from large (e.g. an insurance settlement from a car accident) to very small (e.g. a refund from the local newspaper once the subscription is cancelled).

The general rule is that the executor must collect all legally enforceable debts. Most debts owed to a person continue to be owed after that person passes away. This is why the executor, who represents the deceased, is the one who has to collect them.

There are a couple of ways in which the Will itself can help the executor:

One of the most common debts on an estate is a loan to one of the children that the deceased parent made during his or her lifetime. Ideally, the deceased parent has given the executor some direction in the Will about whether to collect the debt. If nothing has been said, then the executor is obligated to collect that loan. The executor doesn't have the legal authority to forgive that loan if the Will doesn't allow for that. This is a really difficult thing for the executor to deal with, especially if the executor and the beneficiary who owes the money are siblings.

A way of dealing with that debt, rather than actually collecting money from the beneficiary, is to reduce the amount of money the beneficiary is going to inherit.

If you are a parent who has lent money to a child, or a child whose parent has lent money, make sure the repayment (or not) of the loan is mentioned in the parent's Will. This may certainly help to cut down on disputes.

Another place where the Will itself can be very helpful to the executor is the section of the Will that contains powers or authorities for the executor. In some Wills, there is a power to settle this kind of matter as the executor sees fit.

This clause could be helpful where the amount of the debt owed to the deceased is so small that it will actually cost more time and money to collect it than it is worth. The existence of a small debt puts the executor between a rock and a hard place, because he or she is obligated to collect all debts owing, including the small ones. However, if the power referred to is included in the Will, this will allow the executor to decide that a given debt is just not worth it to collect.

All debts that are owed to the deceased, once collected, should be put into the executor's estate bank account that every executor opens up once he or she starts working on the estate. This keeps the estate's money separate from the executor's money and keeps the records straight.