Can You Inherit Debt?

Although the inheritance of debt is something that is not always thought about or talked about, it is something that should be taken into deep consideration. If you have a loved one (a parent most specifically) that is elderly or terminally ill, you should definitely take the time to discuss their overall financial situation. The following information can help you determine whether or not the inheritance of debt is something you should be concerned about.

Analyze the Situation

The best way to determine if you will inherit debt upon a loved one’s passing is to analyze their complete financial situation. Take a look at your loved one’s finances to see exactly what types of debt they carry and how much they owe. You may have to sit down with your loved one to ask them questions and have them find financial records and/or billing statements. Chances are if you are not a co-signer on any of the open accounts, you will not inherit the debt and become responsible for it. On the other hand, if you are a co-signer, the possibility of you inheriting the debt becomes much greater. Because the laws regarding estate resolution vary from state to state, it is a very good idea to familiarize yourself with these laws prior to your loved one’s passing. By doing this, you will be prepared for the estate resolution process after your loved one passes away.

What Will Happen?

When your loved one passes away, you should know that their estate will likely take care of the expenses that come along with their passing. Under most circumstances, funeral expenses, unpaid taxes, and other fees are often taken care of first. After that, the money will likely go to any secured debts such as car loans and mortgages. Once those things are paid, any money that is left will be used towards unsecured debt such as credit cards and unsecured personal loans. If there does not happen to be any money to pay for your loved one’s debt, it may be written off by the creditor because the likelihood of payment is very low. This most commonly occurs with unsecured credit card debt and should not be automatically assumed to happen. Sometimes creditors are aggressive and will pursue debts even after your loved one’s passing. The best thing to do is prepare for the situation so nothing comes as a shock.

The Bottom Line

The bottom line when it comes to the inheritance of debt is that planning is everything. If you analyze your loved one’s financial situation prior to them passing away, you will be prepared for the process of estate and debt resolution after they are gone. This will allow you to make sure there is enough money in their estate to pay their debts. It will also let you know whether or not you are a co-signer on any of the debts. By taking the time to plan ahead, the period of time following your loved one’s death will be much easier to deal with.

Guest post from Alex Storm. Alex writes for


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