Can you inherit your parent’s debt?
July 08, 2015
The death of a parent is a horrible time for anyone. What’s even worse is when they pass away with big debts tied to their names. So, the question is, can you, as their child, inherit this debt?
Typically, unless you cosigned one of the loans of accounts or the estate, you are not responsible for the debt. Typically, not always. The rules can be complicated and differ depending on the type of debt and where your parents lived.
If there is not enough money to cover the debt, in some instances the debt will die with them, but if there is money or other assets, these assets must be used to pay the debt before anything is distributed to the heirs. So even if you are not responsible to pay back their debt, those debts may reduce or completely wipe out what your parents intended to leave behind to you.
Here is a little clarification for you. When it comes to credit cards, unless you are a cosigner, they are not your problem. Creditors can only call you to request payment if you are the executor. Inheriting a home with a mortgage requires that you continue to make those payments. When it comes to taxes, the estate is responsible for paying any property taxes and income taxes, delinquent or otherwise. Also, if federal estate tax is due but property is distributed before its paid, the iRS can put a lien on the property and collect on it.
This information in not intended to be a substitute for specific individualized tax advice. Tax law is subject to change at any time. We suggest that you discuss your specific tax issues with a qualified tax advisor.