When your mom or dad passes away, there are a million details – large and small – that demand your attention. One of the issues that often arises is who has a legal obligation to take care of a deceased parent’s final debts. The bottom line: unless you signed up to be a joint debt-holder, you, as your parent’s child, are not individually responsible for paying their debts. Here’s how it actually works:
When the Assets Outweigh the Debts
The assets left behind by a deceased person are known as that person’s “estate.” If the value of your parent’s estate outweighs the total of the debts they left behind, then those debts are paid using the money or other assets in the estate. Any property left over after the debts are paid is distributed in one of two ways: if your mom or dad left a valid will or trust, then the remaining assets are distributed as provided in that document. If your mom or dad did not have an estate plan, then the remaining assets are distributed as provided by state law.
When the Debts Outweigh the Assets
What happens when the estate does not contain enough assets to pay off all the debts left behind? In this situation, state law again plays a role: it provides the order of priority in which the debts are to be paid. The assets of the estate are used to pay the debts, in order of priority, until there’s no money left. This means that the remaining creditors simply do not get paid. It also means that there’s nothing left over to distribute among the deceased person’s heirs.
Have questions about your mom or dad’s estate? A qualified estate planning attorney can help.