Liability for Parents' Debt After They Are Gone?

Relatives, including adult children, are not liable for a deceased person's debt after they pass away. Even if there is an inheritance left to children, the children are not normally required to pay off any remaining debts their parents held. There are exceptions to every rule of course, and laws vary from one state and situation to another. Generally however, the parents' estate pays off any outstanding debts before an inheritance is distributed.

Your Parents' Estate

Your parents' estate is the combination of assets and liabilities they held when they passed away. Assets include secured tangible items, such as real estate and vehicles, as well as income, retirement or investment accounts and intellectual assets, such as copyrights or patents. Debts include outstanding mortgage or vehicle loans, personal loans, credit cards and similar items.

Liquidating Assets

If your parents owned assets, their estate is handled through the probate court of their state. Part of the probate process involves paying off all qualified debts. Sometimes the estate administrator must liquidate, or sell, assets in order to pay for the debts.

Joint Debts

The one exception is if your parents had you listed on one or more of their debt accounts as a co-signer or joint account holder. If you were an authorized user on an account, you are not responsible for the debt. If you were a joint account holder, however, depending on the state your parents lived in, you could be held responsible for the repayment of that joint debt.

Insolvent Estates

If your parents' estate does not have enough assets to cover all of the debts, the court normally declares the estate insolvent and unpaid creditors must write off the debt. Creditors cannot legally hold a deceased person's children or relatives liable for a debt with which they were not associated. In some states, however, the creditors can attempt to sue the estate for debt payoff. The laws and procedures can get complicated in this instance, but generally if the estate is insolvent, there is nothing there for the creditors to sue for, thus they do not pursue the case.

Collection Tactics

Unfortunately many people do not realize they are not legally responsible for the debt of their deceased parent, and credit collection agencies sometimes take advantage of that lack of knowledge. Credit and collection agencies may contact you to try and talk you into repaying your parent's debts. If this happens to you, refer the collector to the estate executor and politely refuse to talk further with him.