Article: Death and Debts
Kevin Bennardo (University of North Carolina) recently published, Death and Debts, 2025. Provided below is the introduction to the article:
Imagine that you die. Or if you prefer it, imagine that I die. At the time of my death, someone owes me money. My death doesn’t discharge that debt. Now instead of owing me money, they owe money to my estate. Assuming that the debt is paid, who gets that money?
Typically, the answer is fairly straightforward. If the estate has sufficient assets to cover the testator’s specific and general devises, the debt payments are simply added to the residue and benefit the residuary beneficiary.
Now let’s change it up a bit. What if the debt owed to the estate is the unpaid balance from the testator’s sale of an asset that was specifically devised in the will? Now who gets to take over as creditor of the debt?
Perhaps an example would be useful. I’ll play the role of the decedent. Let’s say I make a will in which I devise my valuable collectible to my friend. Five years later, I sell that collectible for $20,000 to help finance my child’s education. Under our sales agreement, the buyer is to pay me $8000 at the time of sale and is scheduled to pay me $1000 per month for the next 12 months. If I die without revising my will, how much should my friend get? $0? $20,000? Some number in between?
Under the Uniform Probate Code, my friend would get the outstanding balance on the purchase price. Thus, if I die immediately after the down payment, my friend would get the right to receive the $12,000 outstanding balance. If I die six months after the sale, my friend would get the outstanding $6000 (assuming that the buyer was current on his payments). If I die ten months after the sale, the number becomes $2000.
But why should this be? Inheritance law seeks to effectuate a decedent’s intent or, if that isn’t known, a decedent’s likely intent. Here, I don’t think that it is actually likely that our decedent’s intent regarding what his friend should receive is diminished by $1000 with every payment. After all, it is essentially random whether our decedent dies with an outstanding balance of $12,000 or an outstanding balance of $0. If the buyer drags his feet and misses a few payments, does that really show that the decedent intended his friend to receive more than if the buyer had kept current on paying his installments? I say the answer is no.
When it comes to death and debts, the more common scenario is that the decedent owes a debt than dies as a creditor of someone else’s debt. Thus, the rules addressing debts owed by a decedent’s estate are more well developed than the rules for debts owed to a decedent’s estate. In this Article, I argue that the treatment of debts owed to a decedent’s estate should be brought more closely in line with the treatment of debts owed by a decedent’s estate.
In particular, when a debt is connected to an asset that the decedent devised to a beneficiary and then sold, the outstanding balance shouldn’t automatically go to the beneficiary of the specifically-devised-but-sold asset. After all, the beneficiary was devised a specific asset and the estate no longer owns that asset. Instead, the outstanding balance of the debt should only automatically go to the beneficiary if the decedent retained a security interest in the asset. Such a rule would treat debts owed to an estate similarly as debts owed by an estate: the debt generally only passes with an asset when the asset secures the debt. Moreover, this proposed approach increases internal consistency with the Uniform Probate Code’s non-ademption rules by promoting freedom of disposition. Read on to find out how.
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