Can Your Parents’ Debt Be Inherited?
Sometimes, parents leave behind more debt than assets. What happens when a parent leaves nothing but debt? Are you liable for their financial choices?
Debts you could be responsible for
A beneficiary is not individually responsible for a debt of the estate. However, if and when the asset is no longer part of the estate and is then transferred to the beneficiary’s individual name and it has a secured claim, like a mortgage on the property, the beneficiary is responsible for making those mortgage payments. Also, where a person co-signs a contract as a guarantor and the decedent’s estate does not have the funds to satisfy the debt, that person could be responsible for payment.
Debts which die with the debtor
With other types of debt, the outcome may differ. For instance, if the estate does not have the funds to pay credit card or medical bills, the estate beneficiaries would not be liable to pay off those estate creditors.
Furthermore, there are other debts which are protected from creditors. Even if your parents have debt, enforceable beneficiary designations for retirement accounts and life insurance are not subject to seizure. If you are the beneficiary designated for such asset, it will pass directly to you upon their death.
Certain other types of debt may die with the debtor. Before you assume responsibility for a debt, make sure to talk to an attorney.
Ultimately, unless you have personally signed off on your parents’ debt, you probably will not be obligated to pay it back. The best way to figure out your rights and responsibilities is to confer with a great probate and estate planning attorney.
When you need probate, estate planning or estate debt assistance, Baumann Kangas Estate Law can help. Call our trusted estate planning attorneys for a consultation today.