Can Creditors Collect From My Children After My Death?

Individuals take on debt for all sorts of reasons, such as paying for large one-time purchases like homes, cars and education or making smaller day-to-day purchases. Large debt balances can take years to pay off in full, and some people may still owe debts when they pass away. Creditors cannot usually attempt to collect on debts from the children of a debtor after the debtor dies.

Debts After Death

When a person dies, assets and debts left behind are pooled together and become the decedent's estate. The debts that you owe after you die are paid out of the assets in your estate, which is managed by an executor that you can appoint in a will. For example, if you died with $50,000 in debt and you owned a home worth $200,000, the executor of your estate could sell the home to pay off your debt after you die. If debts exceed the value of assets in an estate, the estate pays as much as it can to creditors, but creditors cannot collect from anyone else, meaning creditors might not get back all the money that they are owed.

Co-signed Debt

While children are not responsible for most debts after a parent dies, they may be responsible in the case of co-signed debt. A co-signed debt is an obligation where there is a primary borrower and a co-signer that guarantees that the debt will be repaid. The creditor can attempt to collect from the co-singer if the primary borrower does not pay. If the primary borrower dies, creditors may still be able to pursue the co-signer for the debt.

Joint Accounts

If a parent holds a joint credit account with a child, the child may still be liable for the balance of the account after the parent dies. Credit card holders may also have the ability to name authorized account users and order extra cards for authorized users. Authorized users are able to use a credit account but are not liable for the debt accumulated on an account.

Considerations

While creditors cannot typically collect debts from the children of a decedent, debts reduce the amount of assets left over in an estate that pass on to beneficiaries. In other words, debt reduces the inheritance that you leave behind to your children.