Have you taken care of a family member or your parents and are worried about the deceased person’s debt? Will you have to repay your mother’s debt?
Well, typically, you don’t inherit the debt of your parents or a family member unless you have cosigned on a loan or have taken out a credit card together. You are not liable to repay the debt, even if you’re the only heir.
Does that mean you will inherit your mother’s property and won’t have to deal with the debt and debt collectors?
You are not liable for the debts, but the deceased person’s estate is. Therefore, you will not inherit the entire property if your mother has unpaid debt.
How does the deceased person’s estate pay the bill?
The deceased person’s property automatically becomes part of the person’s estate after his or her death. If there is a will, the “executor” has to take care of the estate. And, it is the administrator’s job if there is no will of the person.
The executor/administrator has to do the following things.
- Locate the estate’s assets
- Liquidate or sell the property
- Pay outstanding debts with the amount
Then, the executor distributes the excess amount to the heir(s).
However, assets that pass directly to the heirs are usually not used to pay back the debts. These include life insurance policies, “pay on death” bank accounts, retirement plans, along with other accounts that name beneficiaries if the beneficiary is not the estate.
What happens if there are not enough assets?
All bills may not get paid in such a situation, and the debt collectors can harass you. Do not pay heed to debt collectors. You are not responsible for repaying the remaining credit card balance. The credit card company will forgive the unpaid amount.
When does a caregiver need to pay for his or her mother’s debt?
As already mentioned, you are responsible for repaying the debt in some instances. They are discussed below in detail.
Your name is on the household bills, such as a mortgage or a utility bill. If only your mother’s name is on the bill, the estate’s money can be used to pay it back.
You have cosigned on a loan or a credit contract. By doing so, you promise to pay back any unpaid amount regardless of whether the card owner has defaulted or in case of death. Therefore, you are liable to repay the debt if you’ve cosigned on an account with your mother. However, you won’t have to repay the debt if you are an authorized account user.
Till now, we have discussed whether or not a daughter is responsible for paying her mother’s personal loan and credit card debt. But what about high-interest payday loans?
What happens to payday loan debt after the death of the borrower?
A payday loan debt is quite similar to a credit card debt. Payday loan debt doesn’t pass on to the heirs, but a surviving spouse may need to repay it if it was taken out after marriage in a community property state.
In such a situation, one can opt for payday loan debt assistance to get rid of high-interest debts.
What other debts may you have to repay?
You may need to pay off certain debts after your mother’s death.
Usually, children do not have to repay the medical debt. However, if you have cosigned the admission paperwork and have taken the financial responsibility to repay the bills, you may be liable to repay the debt. And, if you live in a filial state, you may also be responsible for repaying
it in certain situations.
Student loan debt
The federal student loans are forgiven upon the death of the borrower. As per the Economic Growth, Regulatory Relief, and Consumer Protection Act, you also won’t have to repay the private student loan if it was taken out after November 20, 2018.
Mortgage debt is paid back by the deceased person’s estate. If that does not satisfy the entire amount, you may opt to transfer the loan into your name. After the loan is transferred to your name, you will have to repay the loan through monthly installments. Or else, you can also sell
the home to repay the outstanding home loan balance.
Finally, I would like to mention that after a loved one’s death, if you are not sure which debts need to be paid back, you can consult an experienced attorney. The laws can differ from one state to another, so an attorney can help you decide and simplify your financial life.
About The Author: Lyle Solomon is a principal attorney for the Oak View Law Group in California, where he specializes in consumer finance. He has also written several articles on financial well-being. Connect with him on LinkedIn or tweet him at @lyle_solomon.
Disclaimer: The material in this blog is for educational purposes only. It is not intended to replace, nor does it replace, consulting with a physician, lawyer, accountant, financial planner or other qualified professional.
Deb is available as a caregiver consultant. She will answer the question: “Where do I start?” and find the resources to alleviate your stress. If you would like to invest a half hour to learn how she can help you, please contact her at: Free 30 minute consulting call
Deb is the author of “Your Caregiver Relationship Contract.” Available in both English and Spanish, this book explains how to have an intentional conversation and the how unspoken expectations can cause problems during caregiving. Click here to learn more about Your Caregiver Relationship Contract or here for the Spanish version: Su Contrato de relación como cuidador de un ser querido.