Many people believe one of two common myths when a parent dies in debt, says Chicago estate planning attorney Michael Whitty. The first myth is that an adult child will become liable for their parents’ debt. The second myth is that they can’t.
Adult children typically don’t have to pay their parents’ bills, but there are exceptions. And even when a child doesn’t have to pay directly, debt could reduce what they inherit.
Debt doesn’t simply disappear when someone dies, Whitty explains. Creditors can file claims against the estate, and those claims usually have to be paid before anything is distributed to heirs. Creditors also are allowed to contact relatives about the dead person’s debts, even if those family members have no legal obligation to pay.
If you’re concerned that your parents’ debt might outlive them, consider talking to an estate planning attorney for personalized legal advice. Here are some issues to explore.
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When you can and can’t be held personally responsible
Generally, family members don’t have to use their own money to pay a dead relative’s debts unless they:
- Co-signed a loan, were a joint account holder or otherwise agreed to be held responsible for the debt.
- Are the surviving spouse and live in a community property state or a state that requires surviving spouses to pay debts such as medical bills.
- Were legally responsible for settling the estate and didn’t follow state law.
For example, if you’re the executor of your parent’s estate and distribute money to yourself or other heirs before paying off creditors, the creditors could sue you to get the money back.
Should you fear ‘filial responsibility’ laws?
More than half of the states still have “filial responsibility” laws on the books that technically could require adult children to pay their impoverished parents’ bills, says estate and elder law attorney Letha McDowell of Kitty Hawk, North Carolina.
These laws are holdovers from a time when debtors prisons existed, says McDowell, who is president of the National Academy of Elder Law Attorneys. Their use has faded since the 1965 creation of Medicare — the health coverage program for people 65 and over — and Medicaid, the health coverage program for the poor.
Filial responsibility statutes are rarely enforced, although in 2012, a nursing home chain used Pennsylvania’s law to successfully sue a son for his mother’s $93,000 bill. Some legal experts have predicted more such …….
