When your final living parent passes away, you know that you are going to get their assets in one capacity or another. These assets may be put in a will, put in a trust, given as gifts before they pass away or otherwise passed down to the next generation. If you have siblings, you will have to divide those assets according to your parent’s wishes.
But what if your parent passes away with a lot of outstanding debt? Maybe they didn’t have any income at the end of their life and they just put everything on credit. Maybe they had a lot of business debt that you didn’t actually know about, but it still existed. Do you also inherit these debts? Are you and your siblings going to have to pay them off?
The estate will need to pay the debts
The good news is that you personally are not going to be responsible for the debt that your parent had. You had no say in that and the debt does not transfer to you.
Instead, your parent’s estate is going to have to pay off that debt. If they owed $5,000 on a credit card and had $45,000 of business debt, for instance, and they passed away with $100,000 in a bank account, it is likely that about half of that money would have to pay off the debt before going to you.
In this sense, you and your siblings may feel like you are actually paying off debts that your parents took out. If the will doesn’t account for the debt, it could say that you and your siblings are supposed to split the full $100,000. But the estate executor will need to pay the debts first, and then you will divide whatever is left. So, well you are not liable for your parent’s debts and you don’t have to pay them out of your own funds, you may inherit less because they have that debt.
Working through a complicated process
You can imagine how complicated this process can get, and there may be a lot of money involved, so be sure you understand all of your legal options.