Debt After Death: Should Kids Pay for Their Parents?

Your parents are getting older, and, unlike in generations before yours, seniors now have less money and more debt. What happens if they leave this life with debt and no money to pay up? Could you be on the hook for paying their debt after death?

In 2013 61% of households headed by an adult over the age of 60 carried debt. Of those households, the average debt load was $40,900. The problem is worse when you look at their assets. More than 25 million Americans over the age of 60 live at or below 250% of the federal poverty level, and nearly half of single Social Security recipients rely on it for 90% of their income. 

Probably not, say financial experts. In most states debt is a highly personal thing. If you alone purchase a car and you’re the only person on the loan, it’s your obligation. Not even your spouse is on the hook for the debt if he or she is not listed on the loan.

If you live in a community-property state, however, things might be different. These states consider whether you and your spouse purchased something that benefits both of you. If you bought that car in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin, it doesn’t matter whose name is on the loan. It belongs to you and your spouse; if one of you were to shuffle off this mortal coil, the other must continue paying on the loan. 

However, as a son or daughter you’re not responsible for your parent’s debt, even in community-property states, unless you’re a cosigner on the loan. In that case you’re the co-owner of the debt and on the hook to continue payments.

Let’s say that your mother passes away. When that happens, all of the assets she personally owns go into probate. That is the complicated process of administering a deceased person’s will, which consists of paying off any debts and then distributing the remaining assets to beneficiaries. If your mother promised you a $10,000 inheritance, you will only receive it if there’s $10,000 left over after her debts are paid. (For more, see Skipping Out on Probate Costs.)

What happens if the estate lacks the money and assets to pay the debts? In most cases the debt is forgiven, and the creditors lose the rest of the money. They can’t come after you or anybody else, unless there are cosigners on the loan.

In the case of a loan linked to an asset, a creditor could repossess it. For example, if your mother promised you her car as an inheritance, the creditor will likely take the car if she hasn’t satisfied the loan. It’s the same with a house, a boat, jewelry or other valuable items. Credit cards fall under the same rules. Creditors can’t come after other people, but they can go through the repossession process to take back any valuable assets.

It’s not likely that a debt collector will call you to collect on a debt in a parent’s name, but if one does, immediately state that the person is deceased. Direct the collector to the executor of the will, who can provide a death certificate and work through the process of repayment if funds are available. If the collector continues to call, say that you’re aware that you’re not responsible for the debt (unless you’re a cosigner) and not to contact you about this matter in the future. (For more, see How to Confront a Debt Collector.)

Unless you cosigned a loan with Mom or Dad, your parent’s debt and how it’s paid in the probate process doesn’t financially involve you. You may get a smaller inheritance than you thought, or an asset you were promised might be taken to pay the debt, but you aren’t liable for the debts of your parents.