Can you inherit debt from your parents?

17 Dec Is it possible to inherit debt from your parents?

If you are concerned that your parents may have a large amount of debt, then you should be. You may wonder what happens to the debts of your parents after they pass away, or worry that you will be responsible for paying these debts. You cannot inherit debts from your parents. If they die in debt it could mean that creditors take their valuable assets, such as their family house, from them. We’ll take a closer at how debts settle after someone passes away. You will not inherit debts unless you were a joint account owner on a credit or loan. If your parent’s debts exceed the value of their estate, then some debts may have to be left unpaid. It also means that you won’t get much of an inheritance, since any valuable assets–bank accounts, life insurance policies, real estate, etc.–will have to be used to pay off their debts.

Settling an Estate with Outstanding Debts

If you are the executor of your parent’s estate, it will be your responsibility to settle any outstanding debts using the assets that remain. You may start receiving calls from your parents’ creditors in this situation. It is important to note that it is

illegal for a creditor

to harass you about paying your parent’s debt, or to suggest that you pay their debt with your own money.

Any outstanding debts will need to be paid according to a specific hierarchy:

Estate administration feesFuneral costsFamily allowance for dependents

1. 1. Federal taxes
   2. Medical bills
   3. Property taxes
   4. Secured loans and mortgages
   5. Credit card debts and personal loans
   6. Arizona’s Laws on Debt and Inheritance
   7. In Arizona, any dependents the deceased was supporting are automatically entitled to an allowance. The estate will pay a “family allowance” to the spouse and minor children. If the estate is not enough to cover their debts then this allowance will be
   8. capped for one year

. Arizona, unlike many other states does not have a “filial responsibilities” law. Filial responsibility is a duty to provide psychological and social support, as well as financial support, to family members. When to Seek Legal Advice

If your parents may not live long enough to see their debts cleared, you should consult an estate planning lawyer. Phelps LaClair’s legal team can help you protect your parents assets from creditors. For example, we can set up an asset protection trust to ensure that your family home stays in the family.

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–you’ll be glad you did! Photo by

Annie Spratt on Unsplash

used with permission under the Creative Commons

license for commercial use 12/16/24.

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