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Posted by Rebecca (MONEY FORUMS: 5, Answers: 0)
Asked on September 15, 2015 9:25 am
Like the others have said, if you did not co-sign you will not have to pay for their debt. However, if they have debt, their estate will pay the debt first which means you might get less of an inheritance.
It's unlikely you will be on the hook to pay for your parents' debt, should they pass. Creditors may go after the estate, but unless you co-signed a loan, you will not be liable for the debt. Just be sure to contact the credit bureaus and let them know of your parent's death.
You'll be scotch-free unless you cosigned on any of their loans. But note that creditors will go after your inheritance. Even if your favorite wrist watch is willed to you, it's still in jeopardy of being taken away to repay debt.
Hi Rebecca! First, let me say that it is GREAT that you are thinking ahead about this. This was a conversation my mom and I had together when I was a teenager. Beth broke down your responsibilities well, but let me add that another thing you should consider talking to your parents about is the important information you will need immediately if they should pass. For example, you will need a way to get in touch with the executor of their estate as well as paperwork for insurance or other holdings. Also, while it is hard to talk about, you should also have an understanding of their wishes. Funeral costs are so expensive so some people, including my own mom, have elected to not have a full burial and use alternatives to save her children money. I recommend that you know exactly what your parents want and desire as well as get them to put it into writing and either have it notarized or sent to their executor.
Rebecca, it depends on the type of debt and which state you live in. I would consult with an Estate Attorney if this is a real concern. However, usually the debt is repaid from whatever assets your parents leave behind. Everything other than cash is liquidated or sold to do this. The debt usually doesn't pass on to you, but neither do their assets or possessions. It should only pass to you if you cosigned the loan.