Your parents' debts don't go away when the die, but they pass to their estate and not to you. Unless you're a co-signer, you aren't personally liable. On the other hand, if you inherit a home or car that's not completely paid for, the loan comes attached to the property.
How the Estate Pays Debts
Upon death, your parents' assets go to their estate, and the bills and claims are settled through probate. The executor or administrator uses your parents' assets to pay bills such as utilities, mortgages and credit card debt before the heirs receive their share. Creditors typically have a set period of time after the death to put in their claim, depending on the laws of the particular state.
Assets that Aren't in the Estate
Direct to Heirs
Some property isn't part of the estate, so it doesn't go toward your parents' debts. The beneficiaries receive the full amount of this property without waiting for probate. According to the NOLO legal website, the following are excluded from the estate:
- life insurance payments to beneficiaries;
- joint bank accounts with right of survivorship;
- joint stock, mutual fund and investment accounts with right of survivorship;
- pay-on-death accounts;
- money in transit -- for example, checks in the mail.
If your parents kept their assets in a living trust, the laws of the state and the terms of the trust govern whether creditors can take trust property to repay debts.
In some cases, the estate doesn't have enough money to repay all the debts of the deceased, and bills are left over.
When You're Not Liable
Bankrate suggests that in the event death is imminent, your parents remove you from credit cards as an authorized user.
When You're Liable
Your parent's death doesn't cancel your responsibility if you co-signed a loan.
If you co-signed an auto loan, credit card or mortgage with your parent, you're liable for the debt and must pay it whether or not you actually drove the car, made any charges or lived in the house.
Debt collectors are legally allowed to contact you if you have the authority to repay debts from your parents' estate -- for example, as an executor of the estate. They may also contact you to find out who is authorized to pay. However, bill collectors are prohibited from telling you that you're responsible for any debts that aren't your true legal obligation.
You aren't obligated to repay the debts in your parent's estate from your own assets, according to the Federal Trade Commission. This includes only debts that you didn't co-sign.
- NOLO: Do I Inherit My Mother's Debts?
- Bankrate: Do My Debts Pass on to My Kids After Death
- NOLO: Credit Card Debt and Death
- Federal Trade Commission: Debts and Deceased Relatives
- Federal Student Aid. “If Your Loan Servicer Receives Acceptable Documentation of Your Death, Your Federal Student Loans Will Be Discharged.” Accessed July 8, 2020.
- Consumer Financial Protection Bureau. “CFPB Clarifies Mortgage Lending Rules to Assist Surviving Family Members.” Accessed July 8, 2020.
- The New York State Senate. “Section 3212 Exemption of Proceeds and Avails of Certain Insurance and Annuity Contracts.” Accessed July 8, 2020.
- SSRN. “Accidental Inheritance: Retirement Accounts and the Hidden Law of Succession,” Pages 165, 168, 192. Accessed July 8, 2020.
- Legal Information Institute. “Joint Tenancy.” Accessed July 8, 2020.
- Consumer Financial Protection Bureau. “Can I Be Responsible to Pay Off the Debts of My Deceased Spouse?” Accessed July 8, 2020.
- Consumer Financial Protection Bureau. “Can I Be Personally Responsible for Paying My Deceased Relative's Debts and Can a Debt Collector Contact Me About Those Debts?” Accessed July 8, 2020.