7 Ways Midwest States are Cheaper Than Others
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People often wonder if they’ll be responsible for their parents’ debt if their parents pass away. Here’s how the debt of your parents can impact you.
Losing a loved one is never easy, especially when it’s a parent. On top of the emotional stress, there are countless financial stressors to think about as well.
For children of parents who have passed away, the initial concerns are usually the funeral and taking care of the contents of their home. But bills are often found during this clean up.
The debt of a deceased parent can be daunting. You often won’t know how much debt your parents had, which bills were automatically paid and which were handled individually. It’s important to track down as many of the bills and debts your parents had so that you won’t be hearing from the companies later down the line.
The first thing you should do with your deceased parent’s credit card accounts and loans is call the individual creditors. Inform each of them about your parent’s passing. This will close the account and inform the creditor that paying this debt will be handled in probate. Probate is what is done by the state or through attorneys either by verifying a will or assessing the estate. If there is no will, the state will look at the assets of the deceased’s estate and pay off any debts. This can take months for a court to figure out.
When you open a joint account, it means that you and whomever who are sharing the account with are equally liable for paying off any debts incurred. This is not the case if you were an authorized user on the account. An authorized user is not responsible for paying the account and would not be shouldered with the debt.
Secured debts are loans like a mortgage or a car loan. These accounts have goods attached to them that can be sold or returned in order to pay back the loans. Credit cards on the other hand are unsecured debts. When the cardholder dies, there is nothing securing the borrowed money that needs to be paid back. This means that the credit card company has to take a loss.
If your parents die and leave debts without enough money to cover them, creditors may come after you to collect. It is not your responsibility to pay.
Once the estate is in probate, an attorney or the state will create a list of debtors needing to be repaid. First come any secured debts and outstanding loans, last will be credit cards and other debts.
If your parents are leaving you an inheritance, it could be used to pay off their debts before you get your share.
If your parent had been ill for some time before passing away, be on the lookout for unpaid medical debt. Thirty states have laws that require the adult child to repay any unpaid medical bills that the parent or their estate can’t cover. These are called filial responsibility laws. Many states don’t impose them, but there have been cases in the past where hospitals and nursing homes and sued adult children in order to be paid.
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Article last modified on August 7, 2019. Published by Debt.com, LLC