Can You Inherit Someone Else's Debt?

Losing a family member is hard enough without unpaid bills piling up. If your parent, spouse or another loved one dies with debt, you might worry that you're now on the hook for it. In most cases, the answer is no; you don't inherit someone else's debt. But a few exceptions apply, and debt collectors sometimes make the situation more confusing than it needs to be.

Key Takeaways

• In most cases, you're not responsible for a deceased relative's debt. The debt gets paid from their estate, and if the estate can't cover it, the balance often goes unpaid.

• You can be liable in specific situations, like if you co-signed a loan, held a joint account, live in a community property state or signed as a guarantor for medical care.

• Debt collectors may still contact you, but they can't require you to pay from your own pocket unless you're legally responsible. Ask for the debt in writing before agreeing to anything.

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How Debt Gets Handled After Death

When someone dies, their debts don't pass to family members by default. The debts get paid from their estate; the money, property and assets they leave behind. This process is called probate.

The executor named in the will uses the estate's assets to pay creditors in the order set by state law. Secured debts like mortgages and car loans come first, followed by taxes, funeral costs, medical bills and unsecured debts like credit cards.

If the estate runs out of money before all debts are paid, the remaining balances go unpaid. Family members inherit whatever is left after debts and taxes, or nothing at all if the estate is insolvent.

When You Could Be on the Hook

You may owe money after a loved one dies if you find yourself in one of these situations:

• You co-signed the loan: If you co-signed a mortgage, car loan or private student loan, you're legally responsible for the balance.

• You had a joint account: Joint cardholders and joint account owners share the debt. Being an authorized user on a credit card is different; you're typically not liable in that case.

• You live in a community property state: In states like Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, spouses may be responsible for debts taken on during the marriage even if only one name is on the account. Make sure to verify your specific state’s laws. 

• You signed for medical care: If you agreed to pay for a family member's medical treatment as a guarantor, the provider can come after you for the bill.

• Filial responsibility laws apply: About half of U.S. states have laws that could make adult children responsible for a parent's unpaid medical or nursing home bills. Enforcement is uncommon, but the laws exist.

Debts That Get Discharged at Death

Some debts get wiped out with the right paperwork:

• Federal student loans: These get discharged when the borrower dies. The estate isn't billed and family members aren't either.

• Parent PLUS loans: These are discharged if the parent borrower or the student dies.

• Some private student loans: Many private lenders cancel loans upon the borrower's death, but not all. Check the loan agreement.

Credit card debt, personal loans, medical bills and mortgages don't get discharged at death. Those still need to be handled through the deceased person’s estate.

What Happens To a Mortgage or Car Loan?

If you inherit a home with a mortgage, you don't have to pay it off right away. Under the Garn-St. Germain Act, a federal law from 1982, spouses, children and other relatives can take over mortgage payments without triggering the loan's due-on-sale clause. In other words, you can keep making payments under the original terms of the loan. However, if the payments stop, the lender can still foreclose on the property just like they would with any other borrower.

Car loans work in a similar way. You can keep the car and continue payments, sell it and pay off the loan or work out an arrangement with the lender.

How To Handle Debt Collector Calls

Debt collectors may call family members after a death. Here's what to know under the Fair Debt Collection Practices Act:

• Collectors can contact you to ask about the estate or executor.

• They can't lie or say you personally owe money you don't legally owe.

• You can request debt validation in writing.

• You have the right to tell them to stop contacting you.

If a collector crosses the line, file a complaint with the Consumer Financial Protection Bureau or your state attorney general.

The Bottom Line

It’s rare to inherit a deceased relative's debt unless you co-signed, held a joint account or lived in a community property state. If a debt collector calls, ask for proof and don't pay anything you're not required to pay. When in doubt, talk to an estate attorney before writing a check.

FAQs

Am I responsible for my parent's credit card debt when they die?

In most cases, no. Credit card debt is unsecured and gets paid from the estate. If the estate can't cover it, the debt often goes unpaid. You're on the hook only if you were a joint account holder or co-signer.

What happens to medical debt after death?

Medical debt is paid from the estate. In some states, filial responsibility laws could make adult children liable for a parent's unpaid nursing home bills, though enforcement is uncommon.

Can debt collectors take my inheritance?

Collectors can pursue the estate, which reduces what heirs receive. But they can't pull money from your personal accounts unless you're legally responsible for the debt.

What should I do if a collector calls about a deceased relative?

Ask for the debt details in writing. Don't agree to pay or acknowledge the debt as yours. Refer the collector to the estate's executor. For specific advice tailored to your situation, it’s best to speak with an attorney. 

Key Terms

Estate: The money, property and assets a person leaves behind when they die. Debts get paid from the estate before heirs receive anything.

Probate: The legal process of settling a deceased person's estate. It includes paying debts, distributing assets and closing accounts.

Executor: The person named in a will to manage the estate, including paying debts, filing final tax returns and distributing what's left.

Community property state: A state where most assets and debts taken on during a marriage are shared by both spouses. Nine states use this system.

Filial responsibility law: State law that can hold adult children financially responsible for a parent's unpaid medical or long-term care bills.

Sources

• Federal Trade Commission: Debts and Deceased Relatives

• Consumer Financial Protection Bureau: Does a person's debt go away when they die?

• Federal Student Aid: Discharge Due to Death