When a parent passes away, you may already know that you are going to inherit assets. Perhaps you have talked with them about how they want to pass on financial assets or tangible assets. Maybe you have read the estate plan, so you are aware of the exact specifics and what they have decided to leave you.
But at the same time, you know that your parent has some level of outstanding debt. Maybe they have credit cards that still need to be paid, or perhaps they have a car loan with an outstanding balance. Maybe they just need to pay off their property taxes or income taxes for the year. When you inherit the assets, are you also going to inherit those debts?
The estate still owes the debt
Typically, the answer is no. You do not inherit someone else’s debt.
If you cosigned on a loan with your parent, you would still be responsible for it. If you decide to keep an asset, like a vehicle that has an outstanding loan, you would have to take on that financial obligation to do so. But you are not going to simply inherit their credit card debt or other obligations that you did not agree to.
Instead, the estate executor is tasked with paying off the debts on behalf of the estate. They can use your parent’s own funds to pay back creditors, and they usually do this prior to distributing assets to beneficiaries. So you may inherit less than you expected, but you are not taking on a financial obligation.
The probate process can be complex, and it is important to know what legal steps to take during estate administration.