Debt often remains outstanding in someone’s name after they pass away. An individual may not have entirely paid off their credit cards, they may have some outstanding utility bills or they may even owe property taxes or income taxes. It’s possible to plan for some of these financial challenges in advance, but there is often at least some debt left behind when an individual dies.
For the heirs and beneficiaries who are left behind, the question quickly becomes who is obligated to pay this debt. Children sometimes worry that their parents’ debts are going to pass down to them and that they will be responsible for paying them off. Others simply assume that all debts are forgiven when someone passes away and that nothing further has to happen. How does this process work and who has to pay a deceased individual’s outstanding debts?
The estate is responsible for paying off debt
The truth is that debt isn’t generally forgiven when someone dies, but it is also not necessary for children to pay their parents’ debts. The only way that would happen is if they were cosigned on a loan or if they had some sort of joint account. Generally speaking, children do not have to pay money that is still owed by their parents.
Instead, the estate administrator simply has to use the money from a deceased individual’s estate to pay back debt prior to distributing remaining assets to the heirs. The only sense in which an individual’s children may understandably feel that they are “paying” for the debt in question is if they don’t inherit as much as they would have otherwise. But even if the amount of debt owed is greater than the total value of the estate, adult children will not have to make payments personally.
A complicated process
Estate administration can be very complicated. The administrator has to distribute assets to the heirs, pay the debts owed by the estate and take a lot of other necessary procedural steps. Anyone who is in this position needs to take the time to carefully consider all of their legal options and what is expected from them. Seeking legal guidance can be a helpful option as an administrator moves forward.