how debt works with death


Can someone please explain exactly who debt works in relationto death? I understand it means you owe money, but if my parents die owing a bunch of money and leave stuff to me, do I inherit their debt as well? Do I have to pay their medical bills?

In: 50

Before any inheritance is given out, debtors are allowed to file a claim against the estate of the dead person. After the claims are resolved the heirs can get their inheritance. Debts are not passed down to the heirs in the US.

normal procedure is that anyone who your parents owe money too need to settle that with your parents estate (which is a fancy name for “all thier belongings”), and then whatever is left is passed on too you.

As u/twelveparsnips says, debts do not “pass down” automatically to heirs in the USA (Not necessarily true of all countries). Creditors are allowed to claim from the estate of the deceased and only what is leftover is passed on to their heirs.

It is far beyond ELI5 if there are trust funds etc involved – get legal consultation.

Also while debts are not “passed down” automatically this is true only if you did not sign up personally to guarantee their debts or payments. Especially in family situations, some people might blindly sign guarantee forms which (ELI5) binds them to pay the bills in case the other party fails to.

In the United States at least (I can’t speak for other countries) people don’t inherit the debts of their parents. Creditors can take from the estate (the estate is the stuff you inherit) but you can’t personally be on the hook even if the entire estate is not enough to satisfy their debt. The worst case scenario is that creditors take everything from the estate to satisfy the debt and leave you with nothing, but you won’t have to pay out of your own pocket. You would only be personally responsibly for debts that you yourself assumed, for example if you co-signed a loan.

The one exception to the above is some states (but not all) have what are called filial responsibility laws, which means if your parents are indigent (meaning they can’t financially support themselves), you could potentially be responsible for paying some or all of their medical debts or nursing home expenses, but only Pennsylvania has actually enforced this law anytime in the last few decades.

The TLDR is that you will never have to pay off any of their debts when they die. If their debt was more than the value of everything they owned, you will probably not get anything as an inheritance but you won’t have to pay anything else.

As an example, if your parents were $1,000,000 in debt but owned $2,000,000 worth of stuff, they’d take from that 2 million to pay off debts and then you’d get the remaining 1 million. If instead they were 2 million in debt and owned 1 million worth of stuff, that 1 million would be taken to pay the debt but you wouldn’t have to make up the difference of 1 million, it’d just be gone.

Obviously simplified for ELI5 but the general idea is that you don’t have any legal obligation to pay off their debts, but their debtors have a high priority to their property than you do