Debts And Successions

Authored By: Lagniappe Law Lab

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Payment of Estate Debts

Estate Debts

Debts of the Decedent: 

  • Those debts incurred by the decedent or arising as a result of their debt.

Pay the debts at the time due of the deceased through the administration of the estate

  • Done by making, assigning, drawing, endorsing, discounting, guaranteeing, negotiating promissory notes, checks, drafts.

Each heir is liable to their share of the succession for estate debts. To ensure shares are equal an heir with a larger share may also share a larger amount of the debt.

Rights of Creditors

  • A creditor of a successor may, with judicial authorization, accept succession rights. 

  • The creditor accepts the rights in the successor's name if the successor. 

  • The successor must not renounce the succession rights in whole or part. 

  • They may not renounce their rights to the prejudice of their creditor's rights.

The creditor must prove that:

  • The renunciation caused injury to them; and

  • The successor renounced their inheritance by fraudulent means. The successor cannot show an intent to deprive the creditor of his claim on the debtor's property.

Secured vs. Unsecured Debts or Creditors: General Order of Payment

  • Secured creditors first - by preference and priority of their security right.

  • Unsecured creditors paid next - all share pro-rata.

Liability of Successors to Creditors

  • The LA Code provides default rules for the liability of successors amongst themselves.
  • The testator may make specific provisions for the payment of debt(s) in their will.

  • The successors may agree on allocation of payment of debts.

  • The testator's will or successor's agreement cannot impair rights of creditors.

  • Value of inheritance to each heir and allotment with the value of the portion of the debt 

  • Rule of thumb is that ¼ of the gross value of the succession is allotted to the heir(s) liability for succession debts. 

  • Universal successors

    • Liable to creditors for the estate debts in proportion to the part each has in the succession.

    • Only to the extent of the value of the property received by them, valued at the time of receipt.

  • The court distributes the estate to successors and makes payment(s) to the creditor(s).

If the successor is a creditor: 

A successor who is a creditor of the decedent gets paid in the same order.

New Creditor

When a new creditor asserts rights, after the estate was already distributed.

The new creditor's claim may paid in this order:

  • From under the assets remaining under the administration;

  • From the successors who received distribution;

  • From the unsecured creditors who received distribution.

Partition of Succession Property

What if the debts got partitioned?

  • If the partition of debts from the estate occurs then the heir may not be liable for their share of estate debts.

  • Secured creditors get protected by the fact that they have the debt secured by an asset of the estate i.e. a house

  • If the debts of the succession are not partitioned, each heir remains liable for his share of the succession. 

  • Nevertheless, in order to equalize the shares, those heirs who take the largest allotments may be charged with the payment of a larger portion of the debts

Last Review and Update: Jun 28, 2022
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