When a family member passes, what happens to their debt? Everyone knows you can inherit real estate or personal property, but can you inherit debt? The usual answer is no, but, as with almost everything in the law, there can be instances where you find yourself dealing with the debt of a deceased loved one.
The first way you may “inherit” debt is if you co-signed with the deceased. If you co- signed for your family member’s debt and they subsequently pass away, the creditor will likely look to you to pay the remaining balance. The fact that the deceased party was “supposed” to pay the debt will likely not matter to the creditor or to a court if the creditor files a lawsuit to force you to pay.
Another way you may “inherit” debt is if there is debt owed on something that passes to you from the estate of the decedent. For example, suppose a grandparent’s Will says that you get his or her house upon the grandparent’s death. If the house is encumbered by a mortgage at the time of the grandparent’s death, the mortgage will have to be paid prior to the house being deeded to you from the estate. If you are not able to refinance the debt or otherwise pay it, the house may have to be sold to satisfy the mortgage. In some instances the Will may state that the mortgage should be paid from other assets of the estate, but in our experience that is rare.
This is a complicated area of law, and there are an abundance of issues that can arise. If you have questions about estate planning, probate proceedings, or any liability arising from inheritance, you should contact a local attorney. The attorneys at Skeeters, Bennett, Wilson & Humphrey would be happy to discuss your options when drafting a Will, handling an estate, and anything else you may have questions about when planning for your family’s future.