Is a Child Responsible to Pay a Parent's Debts When They Die?
Generally speaking, children are not responsible for the debts of a deceased parent. However, there are some exceptions:
- Anyone who co-signs or guarantees a debt remains liable even after the death of the other debtor. So, for example, if both parties sign a note, both remain liable for the debt even though the proceeds of the note benefited only one of the parties. A spouse or child may also be responsible for hospital or nursing home care of a deceased spouse or parent because of contracts signed by the surviving spouse or child when the decedent was admitted.
- A person who uses a credit card may be liable for those charges on the card even though the person's name was not on the card or the account.
-A husband or wife may be liable for the "necessities of life" provided to the deceased spouse, such as emergency medical care immediately before death, even though provided without the knowledge or consent of the surviving spouse.
If the decedent was receiving public assistance before death, a surviving spouse or child might be liable to the state for reimbursement of that public assistance.
A deceased's debts should be paid with the property in their estate (the property left at their death). Children don't inherit their parent's debts unless they created a co-signor/guarantor/surety/joint account relationship to the debt, so that the child's name is on the debt also, and it isn't a separate debt. Spouses will generally only be liable for a separate debt of the deceased if they live in a community property state. However, state laws vary about which marriage partner is responsible for certain debts depending upon when the debt was incurred, the identity of the debtor, or the purpose of the debt.
Only after the debts are paid will the remaining assets be distributed among the beneficiaries of the will. Be advised that when a child inherits property that is collateral for a debt -- for example, a car that is not paid for or a house with a mortgage -- the debt comes with the property. If there is insufficient money or assets to pay all creditors, then the estate must be divided up as equally as possible, with secured creditors receiving priority. This means that if the deceased parent died with little or no money in their accounts and didn't own a home, unsecured debt, such as credit card debt will not be paid to the creditors.
One of the duties of the executor or administrator of an estate is to make sure that the debts of the decedent have been paid. Because an executor or administrator can be personally liable for mistakes, they will often not pay debts from an insolvent estate without court approval (which protects them from personal liability). the executor or administrator is not responsible for the payment of any costs or debts of the estate unless the executor or administrator makes a mistake. For example, if an executor were to distribute money to a beneficiary and then discover that there were more debts to pay, the executor might have to pay the debt out of the executor's own pocket (unless the executor can recover the money from the beneficiary).
If the assets of the estate are not sufficient to pay all of the debts state statues provide for the priority of payment. For example, in one state the costs are paid as follows:
the costs of administration (i.e., filing fees, legal fees, accounting fees, and the compensation of the executor or administrator).
the family exemption (a payment to the surviving spouse, or children or parents of the decedent residing in the same household with the decedent, of cash or property with a value of $3,500).
the costs of funeral and burial, and for medicines and medical care within six months of death, and for services by any employees within six months of death.
the cost of a gravemarker.
Rent owed for the decedent's residence for the last six months before death.
All other debts and claims.
Claims of the federal government for taxes owed may have priority over other debts because of liens created by federal law. If all of the costs and debts having priority have been paid, and there is not enough money to pay the remaining debts (the last category), then the debts are paid proportionately from the remaining funds, each creditor getting the same percentage of the debt (e.g., the remaining debts might be paid 15 cents for each dollar of debt).
Because an executor or administrator can be personally liable for mistakes, they will often not pay debts from an insolvent estate without court approval (which protects them from personal liability). Distributions to beneficiaries without court approval are called "at risk" distributions, because the executor or administrator is making the distributions with the risk of liability if there are more debts
The creditors of a decedent can usually reach only the assets of the decedent, and there are certain types of assets that are exempt from the claims of creditors or are not considered to be part of the estate.