Many people worry that they will have to pay their parents’ credit cards or other debts out of their own pockets after their parents’ death. In general, this is typically NOT the case.
There are several exceptions to this broad statement. If you have agreed to be liable on the debt as a co-debtor or co-signer, then you would, in that case, likely be responsible for any unpaid balance on that debt.
Additionally, if the debt is secured by collateral, such as a mortgage on a home, that debt remains attached to the home and generally must be paid off at the time of any sale or transfer of the home. This is no different than when you sell your own home and still owe a balance on your mortgage or home equity loan.
Creditors are likely entitled to be paid all or part of their claim (assuming the creditor has properly presented its claim within certain time limits) if there is sufficient money or property in the probate or trust estate.
However, there are sometimes options available to avoid paying all or part of creditors’ claims. Additionally, there are several items that, by law, must or should be paid before any creditors get paid.
Some of these items allow money to go into the pockets of heirs even in the event that the total amount in the estate is less than the total amount of all debts that must be paid.
There are a couple warnings due here: First, someone handling an estate can inadvertently extend the time limit for creditors to present their claims without realizing it.
Second, any payments of debts, even partial payments or settlements, should not be paid without analyzing the order of priority of all the claims in the decedent’s name. Also, debts that have not been properly presented may not have to be paid. Don’t know what the order of priority is? Don’t know how to determine if a claim has been property presented? Then be sure to call us before taking any action!