Q: Legal or Not?Father passed away one day after signing deed for land over to one of two children.
Father has stock and 401K in company he retired from. He has a bank account and multiple vehicles. He, also, has enormous medical bills. The bank account, stock, vehicles and land should have been put into the estate to settle the creditors, correct? Is it legal to give the land away before death (it was not sudden, he was terminal)? Will the sons be responsible for the debt and will the estate be settle without incorporating the land?
A: First of all, you will not be liable for the estate’s debts simply because you are the son of the decedent. The debts of a decedent do not pass on to his devisees. If the debts outweigh the value of the decedent’s assets, the creditors will each only get a prorated portion of what is owed to them. Their claim will then effectively be wiped out.
However, the entirety of the estate must be brought in to pay creditors before that debt disappears. If they are needed to pay the creditors of the estate, non-probate assets such as the 401(k) and stock can and should be brought back into the estate by the personal representative.
Additionally, assets which are conveyed out of a decedent’s ownership before his death with the intention of defrauding creditors can also be brought back in to pay the estate’s debts. The personal representative (executor or administrator) will need to sue to recover the property from the grantee, and then sell it to pay the estate's debts.
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