Will You Inherit Your Parents Debt? (2024)

FAQs

Will You Inherit Your Parents Debt? ›

Do you inherit your parents' debt? If a parent dies, their debt doesn't necessarily transfer to their surviving spouse or children. The person's estate—the property they owned—is responsible for their remaining debt.

You are not responsible for your parents' debt. This is true regardless of whether you inherit assets under their estate. However, a parent's estate must settle any debts before you can inherit. And children often share financial responsibilities with aging parents, often medical and housing costs.

A creditor cannot go after a child to collect on a parent's debt if there is no contractual agreement between the child and their parents' creditors. However, a child may be personally liable if: They cosigned or agreed to be a guarantor on a parent's debt. They held a joint credit card with the deceased parent.

Medical debt for the deceased is paid by a person's estate — if the estate has enough assets. An estate with enough assets to pay any or all debts is considered “solvent.” If an estate does not have enough assets to pay debts, it is considered “insolvent.” Survivors are not responsible for medical debt, in most cases.

If there's no money in their estate, the debts will usually go unpaid. For survivors of deceased loved ones, including spouses, you're not responsible for their debts unless you shared legal responsibility for repaying as a co-signer, a joint account holder, or if you fall within another exception.

Unfortunately, while some debts absolve after the debtor dies, that's not true of tax debts. The debt becomes an obligation of the deceased's estate, which is subject to an IRS lien. If the estate includes a home or other property, the lien will reflect that.

Once a child turns 18, the child is legally responsible for his or her own medical bills unless the parent signs an agreement with the medical provider to pay those bills. As for other debts incurred by children under 18, parents generally are not legally liable for these debts.

If a parent dies, their debt doesn't necessarily transfer to their surviving spouse or children. The person's estate—the property they owned—is responsible for their remaining debt.

Your mother or father may have had substantial credit card debt, a mortgage, or cr loan. The short answer to the question is no, you will not be personally responsible for the debt, but failure to pay such a debt can affect the use and control of secured assets like real estate and vehicles.

If you wish to protect yourself, you may consider abstaining from taking on any debt with your parents during their lifetime. Estate planning is for the whole family. If you and your parents would like to set up Estate Plans to direct how your assets and debts should be handled, Trust & Will is here to help.

Can creditors go after beneficiaries? ›

When a person dies, creditors can hold their estate and/or trust responsible for paying their outstanding debts. Similarly, creditors may be able to collect payment for the outstanding debts of beneficiaries from the distributions they receive from the trustee or executor/administrator.

Additional examples of unsecured debt include medical debt and most types of credit card debt. If you die with unsecured debt, repayment becomes the responsibility of your estate. Your legal estate refers to all the assets, property and money left behind by you or another deceased person when they die.

Settling an Estate

Dealing with the death of a relative shouldn't include stress created by letters and telephone calls from creditors insisting on payment. There are laws that protect people from inheriting debt, so if a credit card company solicits payment upon a family member's death, be cautious before paying it.

If the deceased was the primary borrower, the estate will be responsible for the debt. If the estate cannot pay it, though, the cosigner will be responsible.

If you are the executor or administrator of the deceased person's estate, debt collectors can contact you to discuss the deceased person's debts. Debt collectors are not allowed to say or hint that you are responsible for paying the debts with your own money.

A person's personal debts are generally separate from their parents' assets. However, there can be exceptions, such as if your parents co-signed a loan or if there are specific legal claims against their property.

For another, kids don't actually inherit your credit score, based on your presumably long credit history. They only get the benefit of that one account. It will take them about six months to start compiling a credit score of their own. Most important, kids don't need your help to get credit.