When your parents pass away, you know that you may inherit their assets. The estate plan will help to determine how these should be divided. For instance, if your parents pass away with $10,000 in a bank account, they may instruct that you split it between yourself and your sibling. If there are only two beneficiaries, you both take $5,000 in accordance with the estate plan.
But what if you find out that your parents also owed $10,000 on a credit card? In the same way that you inherited their leftover assets, are you also going to inherit their remaining debts?
Only if you are on the account
There are some situations in which debt can pass to a child. For instance, maybe you and your parent have a joint credit card account. Since you are both responsible for the payments, if your parent passes away, you still have to pay off the remaining balance – even if they were the one who used their card to make those charges.
But in the vast majority of cases, children are not listed on financial accounts – such as credit cards or mortgage loans. This means that the debt is not going to pass to you and you don’t have to worry about inheriting it. After all, many adult children aren’t even aware of the debt that their parents hold and would have made no plans to pay it off.
This doesn’t necessarily mean that the debt is erased when your parent passes away. Typically, the estate executor can use the assets from the estate – such as the $10,000 from the aforementioned bank account – to pay off the debts.
This can be a complicated legal process, so those involved need to know exactly what options they have.