It was recently reported that Lisa Marie Presley’s daughter, Riley Keough, who is the sole trustee of her late mother’s estate, refused to pay a debt on her mother’s U.K. home one year after her death. Keogh claimed in her court filing that she shouldn’t be held responsible for the outstanding debt of $1.6 million because Barclay’s Bank did not make a claim within the one-year anniversary of her mother’s death. The bank claims that Presley had personally guaranteed repayment of the loan but Keough alleged that her mother only guaranteed loan interest payments between 2010 and 2015. The home was sold in 2021.
When a loved one passes away, the question of who is responsible for their debts often arises, especially when they leave behind a trust. Managing the deceased's debts can be complex, particularly if the debts extend beyond national borders. In this blog post, we'll explore the intricacies of estate responsibility for debts after death, particularly in the context of trusts, any time limits involved, and how international debts are managed.
Responsibility for Debts with a Trust:
One common misconception is that trusts shields assets from creditors, but the reality is more nuanced. While assets held in a trust may avoid probate, they may still be used to satisfy the deceased’s debts depending on the type of trust and applicable laws.
Revocable living trusts, which are often used in estate planning to avoid probate, do not typically shield assets from creditors. After the trust creator's death, the Trustee is responsible for managing the trust's assets and distributing them according to the trust's terms. However, creditors may make claims against the trust assets to satisfy outstanding debts before beneficiaries receive their inheritances.
Irrevocable trusts, on the other hand, may offer more protection against creditors, as the assets are technically owned by the trust rather than the individual. However, there are exceptions, such as certain Medicaid claims or debts incurred by the deceased before the trust was created or bankruptcy claims against certain self-settled irrevocable Trusts (aka Domestic Asset Protection Trusts) by way of example.
Time Limits and Statutes of Limitations:
In many jurisdictions, there are statutes of limitation that dictate how long creditors have to make claims against an estate. Once this time period expires, creditors may no longer pursue unpaid debts. However, the specific time limits vary by jurisdiction and type of debt, so it's essential to consult with a qualified legal professional familiar with local laws.
It’s also crucial for Trustees and Executors to be aware of these time limits to ensure that debts are addressed promptly and fairly. Failing to properly manage creditor claims could result in personal liability for the trustee or executor.
Dealing with International Debt:
Debts owed by the deceased to creditors outside the country add another layer of complexity to the estate settlement process. In such cases, it's advisable to seek the assistance of legal experts with experience in international law and estate planning in the jurisdiction where the debt is owed.
The treatment of international debts depends on various factors, including the laws of debtor’s country of residence, any applicable treaties or agreements between countries, and the nature of the debt itself. Communication with foreign creditors and engaging legal representation in the relevant jurisdiction may be necessary to address these debts effectively.
The responsibility for paying a deceased person’s debts depends on various factors, including the type of trust involved, any time limits imposed by statute, and the location of the debts, especially if they are international. Trustees, executors, and beneficiaries should work closely with qualified trust and estates attorneys to navigate these complexities and ensure that the deceased's debts are handled appropriately within the confines of the law.
If you, a friend, or family member need help with trust administration after the death of a loved one or establishing or restating an estate plan, please reach out to our Intake Department at 760-448-2220 or at https://www.geigerlawoffice.com/contact.cfm. We have offices in San Diego County (Carlsbad) and Orange County (Laguna Niguel), but we can assist families throughout California as well.
