You believe that you’re going to inherit assets from your parents when they pass away. Maybe they have tangible assets that they’ve left you in their estate plan, such as family heirlooms or home furnishings. Maybe they’re going to leave you real estate, like the family home or a vacation property. Perhaps you expect to take on financial assets, such as bank accounts or investments.
But you’re also aware that your parents have debt that may not have been paid off by the time they pass away. Perhaps they have credit card debt, for example, or they owe back taxes. Are you going to inherit these debts from your parents as you take on their assets?
Debt should be paid during probate
No, you should not inherit these debts because they should get paid off during probate. This is done by the estate executor. They can take funds from your parent’s estate, pay down the debts and then transfer the remaining assets to the beneficiaries.
In some cases, this does mean that you won’t inherit as much as you would have otherwise. If your parents left you $20,000 but still had $10,000 in credit card debt, the executor may need to use some of those funds to satisfy the debt obligations before transferring the rest to you.
However, that doesn’t mean that you are going to inherit the debt—unless you cosigned on a loan with your parents or something of this nature. But if you were uninvolved when they took on that debt in the first place, it doesn’t become your responsibility just because they have passed away.
Handling assets and debts can be complex during probate, so be sure you know what legal steps to take.
