Friday, June 20, 2014
The death of a parent is often a fraught experience. Adding to this anxiety can be the discovery that mom or dad died with debt. In most instances, the estate is liable to pay the debt. However, this is not always the case. The rules are complex and differ depending on the type of debt and where your parent resided. Creditors typically have a fixed period of time to make claims against your parent’s estate. “If there’s not enough money to cover the debt, in many instances your parents’ debt will die with them.” If there is money or other assets, they must first be used to pay debt before anything is distributed to heirs.
Unless you are a co-signer on your parent’s credit card, you are not responsible for their bills. Debt collectors may only call you requesting payment if you are the executor. The estate is responsible for paying any property and income taxes, delinquent or otherwise. But if federal estate tax is due but property is distributed before it is paid, the IRS can put a lien on the property.
Inheriting a home with a mortgage is a more complex issue. If you inherit your parent’s home with an existing mortgage, the lender may not demand that you pay off the mortgage immediately. You may also choose to disclaim your inheritance, in which case the house would go to the person designated if you had died before your parent.
See Jeanne Sahadi, Can You Inherit Your Dead Parent’s Debts?, CNN Money, June 19, 2014.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.