Do Children Inherit the Responsibility for Parents Debts?

by James DiGeorgia | 01/25/2021 10:55 AM
Do Children Inherit the Responsibility for Parents Debts?

On average, every American owes an excess of $25,000 in mortgages, credit card debts, installment payments for goods and services. Having debt has become part of the American dream. With 25 million people infected with the potentially deadly Coronavirus and 4,000 people a day dying, the question of debt and who is responsible for the debt when a parent dies is a legitimate concern to parents and children.


Do your financial debts pass on top of your children when you die? Most people prefer to leave money, a legacy behind rather than debts, but it doesn’t always happen that way. So here are the facts.

Some debts can be your heir’s (your children’s responsibility); it all depends on the kind of debts you’ve left behind. This article analyzes inheritable debts and what you can do to prevent leaving your kids your debts to pay.

Inheritable Debts

#1: Credit Card Debt:

If you cosigned a credit card with your children, debt collectors would likely hassle your kids once you pass on. Debt collectors can be aggressive, but once your children issue them with a death certificate, they are legally obligated to stop accruing interest on the credit card debt

#2: Vehicle Loans:

Similar to other secured debts, assets you leave behind are used to cover loans. If your children inherit the car you purchased with a loan, they are under obligation to either sell the vehicle to cover the mortgage or continue making partial payments till they cover the loan.

#3: Medical Bills:

If you’ve received Medicaid when you were over 55 years of age, the state can repossess some of your property. For instance, if you are a Pennsylvania resident and your property can’t cover medical bills, your children will be responsible for all your medical bills.

#4: Education Loans

The government forgives federal student loans once you pass on. However, if you apply for a private student loan, the lender is at liberty to recover the property you placed as collateral. If the property can’t cover the student loan, the loan will go unpaid.


Rules that Debt Collectors Must Follow

Debt collectors sometimes hassle people, and unfortunately, they might pursue your children once you are gone. Luckily, the Fair Debt Collection Policy was enacted to shield your children from all forms of harassment once you pass on. The policy will protect your ids from deception or unfair treatment by debt collectors when recollecting debts.

In 2011, the Federal Trade Commission outlined guidelines on how debt collectors should manage deceased relatives. Debt collectors are under obligation to discuss the deceased debts with your children or those listed as inheritors, and they are restricted from discussing your debts with other parties.


Bottom Line

Americans often find it tempting to postpone repaying debts, but the best way to prevent debt inheritance is by repaying all debts when you are still alive. Generally, your children will be held accountable for all debts they cosigned with you, and collectors will let it slide if the assets left behind can’t cover the loan.


Ari Lazarus, Consumer Education Specialist, FTC, says,  A debt doesn’t go away when a person dies. But that doesn’t (usually) mean you owe it, either. The deceased person’s estate owes the debt. If there isn’t enough money in the estate to cover the debt, it typically goes unpaid. There are some exceptions, though. For example, you could be responsible if you were a co-signer, or in some cases, if you’re the person’s spouse. Learn about other possible exceptions to the rule here.


                     Will You Inherit Your Parents’ Debts After They Die?




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