It was a mild surprise to you, but when your parents died, they had significant debt. This scenario makes you wonder whether you are responsible for paying it. The simple answer is “no.” The remainder of their estate will pay off as much of your parents’ debt as possible.
This will be done by selling assets such as their home, cars, boat and other possessions. Proceeds go toward the debt. If everything goes smoothly, creditors will write off the remaining debt. However, it really is not quite that simple.
More seniors are experiencing financial troubles
Not surprisingly, as more baby boomers die, their adult children expect to inherit at least some money. However, in some cases, parents may leave nothing but a mountain of debt.
More seniors 70 and older carry significant debt into their retirement years, still paying on mortgages and credit cards. It is alarming to learn that seniors 65 and older comprise one in eight people who file for bankruptcy. That number represents a fivefold increase from 25 years ago.
In general, a person cannot “inherit” the debt of their parents after their deaths. Non-spouse heirs and survivors typically do not have to repay the debts owed except in circumstances in which they co-signed for a loan with their parents or together applied for credit with them.
Expect contact from creditors
Also, assets inherited by heirs do not have to be used to repay an estate’s debts. These assets may include retirement investments and life insurance policies that specifically name that person as the beneficiary.
Even though you cannot inherit your parents’ debt, you likely will receive contacts from creditors bent on collecting that debt. These creditors may pressure and harass you or attempt to lay a guilt trip on you in wanting you to “do the right thing.” Do not listen to them.
Not responsible, but some work lies ahead
Even though you are not responsible for paying your parents’ debt after their deaths, you can still expect a great amount of work ahead of you as you settle the estate. Having a skilled attorney at your side will help you sort through and overcome this financial mess left by your parents.