Image

2:52 PM / Tuesday September 19, 2017

18 May 2017

Savvy Senior: Can I Inherit My Parent’s Debt?

  • Facebook
  • Twitter
May 18, 2017 Category: Seniors Posted by:

Dear Savvy Senior,

What happens to a person’s debt after they die? My mother has taken on a lot of medical and credit card debt over the past few years and I’m worried that my brother and I will be responsible for it when she dies. What can you tell me?

Image

Worried Daughter

Dear Worried,

In most cases when a person with debt dies, it’s their estate, not their kids, that is legally responsible. Here’s how it works.

When your mom dies, her estate – which consists of the stuff she owns while she’s alive (home, car, cash, etc.) – will be responsible for paying her debts. If she doesn’t have enough cash to pay her debts, you’ll have to sell her assets and pay off her creditors with the proceeds.

Whatever is left over is passed along to her heirs as dictated by the terms of her will, if she has one. If she doesn’t have a will, the intestacy laws of the state she resides in will determine how her estate will be distributed.

If, however, she dies broke, or there isn’t enough money left over to pay her “unsecured debts” – credit cards, medical bills, personal loans – then her estate is declared insolvent, and her creditors will have to eat the loss.

“Secured debts” – loans attached to an asset such as a house or a car – are a different story. If she has a mortgage or car loan when she dies, those monthly payments will need to be made by her estate or heirs, or the lender can seize the property.

There are, however, a couple of exceptions that would make you legally responsible for her debt after she passes away. One is if you are a joint holder on a credit card account that she owes on. And the other is if you co-signed a loan with her.

NOTE TO SPOUSES: These same debt inheritance rules apply to surviving spouses too, unless you live in a community property state – Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin. In these states, any debts that one spouse acquires after the start of a marriage belongs to the other spouse too. Therefore, spouses in community property states are usually responsible for their deceased spouses debts.

Protected Assets

If your mom has any IRAs, 401(k)s, brokerage accounts, life insurance policies or employer-based pension plans, these are assets that creditors usually cannot get access to. That’s because these accounts typically have designated beneficiaries, and the money goes directly to those people without passing through the estate.

Settling Her Estate

You also need to be aware that if your mom dies with debt, and she has no assets, settling her estate should be fairly simple. Her executor will need to send out letters to her creditors explaining the situation, including a copy of her death certificate, and that will probably take care of it. But, you and your brother may still have to deal with aggressive debt collectors who try to guilt you into paying.

If your mom has some assets, but not enough to pay all her debts, her state’s probate court has a distinct list of what bills get priority. The details vary by state, but generally estate administrating fees, funeral expenses, taxes and last illness medical bills get paid first, followed by secured debts and lastly, credit card debts.

Need Help?

If you have questions regarding your situation, you should consult with a consumer law attorney or probate attorney. Or, if you just need a question or two answered, call your state’s legal hotline if available (see LegalHotlines.org), or legal services provider.

Send your senior questions to: Savvy Senior, P.O. Box 5443, Norman, OK 73070, or visit SavvySenior.org. Jim Miller is a contributor to the NBC Today show and author of “The Savvy Senior” book.

  • Facebook
  • Twitter

Leave a Comment

Recent News

Go With The-Flo

Harlem Fashion Row’s Style Awards honors Spike Lee

September 15, 2017

ABOVE PHOTO:  Spike Lee  (Andrea Raffin/Shutterstock) By Florence Anthony Nissan Diversity took the opening night of New...

Seniors

Florida nursing home deaths spur efforts to protect elderly

September 15, 2017

ABOVE PHOTO:  In this Sept. 16, 2005, file photo, a wheelchair with a slipper still on the...

Food And Beverage

Stay Lean with Protein

September 15, 2017

ABOVE PHOTO:  Grilled Southwestern Steak and Colorful Vegetables   Family Features Shedding excess pounds doesn’t have to...

Entertainment

19 love tips from Kindred the Family Soul as they celebrate 19 years of marriage

September 19, 2017

R&B duo Kindred the Family Soul (Fatin Dantzler and Aja Graydon) are celebrating 19 years of wedded...

Health

Caring for Children with Cancer

September 15, 2017

www.cancer.org The types of cancers that develop in children are often different from the types that develop...

Oasis

What are you saying?

September 15, 2017

By Dianna Hobbs www.diannahobbs.com “I want you to speak only the word of God,” I wrote. “No...

The Philadelphia Sunday Sun Staff