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Estates, Not Heirs, Generally Pay the Debts of the Deceased

The debts of a deceased parent are mostly not passed on to children, though some exceptions exist. However, creditors can make claims on the estate, reducing the size of the inheritance. CNNMoney says creditors typically must make claims against the estate within two to six months of the deceased’s passing. If there is not enough money in the estate to cover the liabilities, the debt will likely go unpaid. Laws do vary by state, however. Additionally, an heir can be responsible if he or she co-signed a loan for the deceased parent.

Here are the basic rules regarding common types of debt.

Credit Card Debt: Credit card bills are payable by the estate. A credit company can only request payment from the estate’s executor. Heirs are not responsible as long as they are not a cosigner on the account.

Medical Debt: The laws vary by state and who the creditor is. Medicaid payments made on behalf of the deceased parent can be recovered from their estates under certain circumstances. Bills owed to hospitals or nursing homes may become the responsibility of adult children if a state has a “filial responsibility” statute. These statutes legally require adult children to care for their parents if their mother or father becomes indigent and the child has the ability to pay for care.

Mortgage Debt: If the deceased is the only person on the mortgage, the estate is responsible for paying the debt. If an heir co-signed the mortgage, then he or she will become responsible for the loan payment. If a house with a mortgage is inherited, options exist. The mortgage can be paid off by the heir (or possibly the estate), the heir may be able to take over the mortgage payments, or he/she may be able to disclaim the inheritance.

Tax Debt: Taxes, including property and income taxes, are the responsibility of the estate. Heirs are only responsible for taxes they incur on inherited property, not taxes owed by the deceased.

Settling an estate can be complex, and if questions exist about who is responsible for paying a debt, enlisting the help of an attorney may be prudent.

Source: “Can You Inherit Your Dead Parent’s Debts?,” CNNMoney, June 19, 2014


Discussion

Barry from PA posted 2 months ago:

I'm an attorney and practice both Elder Law and Estate Law. "Filial responsibility" has been a hot issue in Pennsylvania in the past few years, after a nursing home successfully sued the adult son for Mom's unpaid nursing home bill.

These suits are, fortunately, rare, but the precedent is enough to make people plenty nervous. Imagine having to not only support your own family (spouse, kids, etc.), but being also slammed with a huge bill for Mom or Dad's stay at Happy Acres.

At these times, it's critical to seek experienced legal counsel as soon as a claim is made (or before).


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