The general rule in Minnesota is that if a person is not a cosigner or primary account borrower on a credit account or loan, he or she will not be personally responsible if the borrower on the account dies. This means that heirs and executors for a decedent's estate cannot be responsible to personally pay off the deceased person's bills. The issue is often raised when family members meet with their estate planning attorney to devise an estate plan for one or more of them.
The estate itself is usually liable, however, for decedent's debts owed at the time of death. When the estate is probated, the executor must advertise the estate filing and notify creditors to file their claims within a set number of days or suffer nonpayment. The executor must take care in particular to pay all government assessments, filing fees, taxes, liens, private medical bills, funeral expenses, and other statutorily designated expenses.
The general rule is that if a creditor does not respond in a set number of days to the advertisement of the filing of the estate, the debt will not be owned by the estate. When the executor does pay a debt of the decedent, the money comes out of the estate assets. Those assets are largely turned into cash and deposited in an estate bank account to use for bill payment and final closing of the estate. Using assets to pay estate bills reduces the net distribution for heirs.
Estate planning in Minnesota may be used to protect assets from creditors by setting up accounts with beneficiaries and also joint accounts with the right of survivorship. If a beneficiary is listed, for example, on a life insurance policy or a retirement account or even an investment account, the proceeds at death go to the beneficiary and not to the estate. In most instances, the decedent's creditors cannot touch that money. Jointly owned assets with the right of survivorship, and also all property owned jointly by husband wife, goes to the survivor instantly at the time of death and cannot be touched by the decedent's creditors.
Source: cnbc.com, "Will your heirs get slammed with your debt when you die?", Sarah O'Brien, Aug. 29, 2016