Can You Inherit Debt?

The last thing you need as you grieve the loss of a loved one is creditors hounding you about their debt. Something you may be glad to know—in most situations, you're not responsible for a loved one's debt. Let’s explore the exceptions first.

Debt That You Could Inherit

Whether they were handling it on their own or enrolled in a debt relief program, you're rarely responsible for someone's debt after they die. But there are a few exceptions:

• Mortgages and home equity loans. Let's say you inherit a home with an outstanding mortgage and/or a home equity loan borrowed against it. If you want to keep the house, it's up to you to repay that debt. Even if the plan is to sell the property, you must keep the payments current until you sell the house.  

• Joint debt. If you took out a loan or credit card with the person who died, it's considered a joint debt, because loan approval is based on your combined income and assets. As the surviving party to the joint debt, you're responsible for it.

• Co-signed debt. You're responsible for any loan or credit card you co-signed for another person—even after that person dies.

• Community property states. If you're married and live in a community property state—Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin—most debts taken on during your marriage are considered shared. That means the surviving spouse could be responsible for those joint debts, though the exact rules can vary depending on the state and the type of debt.

Solvent vs. Insolvent Estate

When a person dies, creditors will be interested in one thing: whether the estate is solvent or insolvent. Your estate is everything you own or owe at the time you die. 

Here's the difference:

• Solvent estate. When someone leaves behind a solvent estate, it means there’s enough money to cover all outstanding bills and debts—exactly what creditors hope for.

• Insolvent estate. The person's estate does not have enough money to pay all the debts left behind. When an estate is insolvent, creditors must line up to be paid.

Typical order of payment

When a claim is filed, the executor first verifies it within six months. The executor is the person in charge of making sure all bills are paid and that heirs receive their share of the estate. Once the executor verifies a bill is legitimate, it's added to the "pay" list.

According to state and federal laws, bills are typically paid in this order:

1. Fees, such as attorney, fiduciary, executory, and estate taxes

2. Funeral costs

3. Family allowance (depending on the statutes of their state)

4. Outstanding federal taxes

5. Medical debt not paid by insurance

6. Property taxes

7. Credit cards and personal loans are generally at the bottom of the list

If the Estate Was Solvent

If the person who died leaves behind assets, those funds are typically used to repay any outstanding debts. Liquid assets such as bank accounts, money market accounts, stocks, and bonds are cashed out to pay debts in a certain order. Tangible assets—like property, cars, a boat, recreational vehicles, jewelry, electronics, art, and musical instruments—are sold to pay debts if there aren't enough liquid assets to cover them all. 

Watching parts of an inheritance get sold to pay off debts can be disappointing if you’re a beneficiary. In the long run, it’s actually a relief. It means those debts are taken care of and you’ll never have to worry about them.

What About Filial Responsibility?

If there's not enough left in the estate to pay the bills, the responsibility could in some cases fall to the person’s children under laws known as filial responsibility. These laws date back to the colonial era and are rarely enforced, according to the National Conference of State Legislatures (NCSL). In fact, several states, including Idaho, Montana, Iowa, and Utah, have recently removed filial responsibility laws from their books.

The rules vary dramatically even among states that still have filial responsibility on the books. For example, in Arkansas, payment is only required for adult mental health care under some circumstances. In Connecticut, the law only applies if the parents are under age 65 and generally doesn’t apply to a parent's debts after their death. Nevada law says it's only enforceable if the adult child has a written agreement to pay for care. 

If a parent dies. Although filial responsibility laws are rarely enforced, it pays to check the laws of your state to learn more. If your state still abides by the old filial responsibility law in its books, find out which details might apply to you, if any. 

Don't Be Surprised if You Hear From Debt Collectors

Even if you know you have zero responsibility for your loved one's debts, don't be surprised if debt collectors call or otherwise contact you. If the dead person left an insolvent estate, the debt collectors are aware they can't get blood from a stone, but that won't stop them from trying to get you to pay it. 

Don’t agree to anything. While debt collectors are free to contact you to find the estate's executor, they can't wrongly claim you’re personally responsible for a debt you don't owe. Give them the contact information for the executor and hang up the phone. 

In most cases, you won’t be responsible for paying the debt of a deceased loved one, but you may still be asked. If a bill collector contacts you, consider taking the following steps:

• Send a written request. If you're contacted by a debt collector, you have the right to request that they cease all contact. 

• Hand the issue off to the estate executor. If your loved one died without a will, the court will assign an executor to handle such matters. 

• Protect your money. Do not pay debt with your own money unless it's an account you hold jointly or have cosigned.

The death of someone you care about is difficult enough. Don't make it any harder on yourself by accepting responsibility for debt you don't owe.