will_i_inherit_credit_card_debt

“When a parent passes away, will their child inherit the debt?”

Although not a pleasant subject to think about, it is a question that many people have on their minds and something that needs to be addressed. There isn’t a simple yes or no answer, but depending on the jurisdiction you live in, you may not be responsible for your parents’ debt (at least not directly).

While such questions can only be answered by a licensed attorney in your jurisdiction, generally when someone passes away, the executor turns to the person’s estate first to pay off any remaining credit card balances and other debts. If the deceased person has more debts than they have assets, the creditors may be out of luck and will likely have to take a loss. Still, that doesn’t mean that your parents’ debts won’t affect you.

If you are a beneficiary, debts are often dealt with first before any inheritance is distributed. For example, some jurisdictions require that payments be made in this order:

  1. Secured Debts (i.e. mortgage, car loans)
  2. Unsecured Debts (i.e. credit card debt)
  3. Inheritances as defined by a will

Aside from that, there may still be situations in which you can be left responsible for your loved one’s debt. Here are two examples:

Being a Co-Signer or Joint Card Holder
If you co-signed for a credit card and/or are a joint card holder, you are likely liable for the debt. Parents often co-sign with children who are just starting out, and adult children co-sign for elderly parents to help them keep track of their expenses. It’s important that you always keep tabs of your credit report and try to make sure any financial issues are resolved before a traumatic event occurs.

Using a Card after the Card Holder’s Passing
If you continue to use a credit card as an authorized user after the cardholder passes away, that could be a big problem. It can look as though you are spending someone else’s money with the intention of not paying it back. The same goes for using a card when you know the card holder is near death and doesn’t have enough money in their estate. You could be accused of fraud, especially if you knew that the debt would not be repaid.

The death of a parent can sometimes mean financial turmoil for surviving relatives, but just as in any money situation, addressing it upfront will save you a great deal of stress down the road.  Generational debt has the potential to get messy. It’s best to consult with an attorney who can look at your situation and help you decide what your next steps should be.