Inheriting Your Parents’ Bills

Tuesday, April 3rd, 2018

When a parent dies, the emotional turmoil can be overwhelming and dealing with financial struggles and confusion can add another layer of stress.

To help surviving relatives navigate the maze of lingering debt, it’s important to realise that debts left by a deceased parent are not the responsibility of adult children.

There is generally no liability for a child to take on parental debt – instead, the first place to turn is the estate left by the parent who has died. If a debt exceeds the assets left in the estate, the estate can go bankrupt to clear the debts but it’s important to note that a bankrupt estate also means no inheritance for children left behind.

The reality is that debts always come first and must be dealt with, so if surviving children do make a decision to ignore the parents’ debt and let creditors sue them, all they are doing is adding legal costs to the stress, with the end result being that they will not have access to some or all of any potential inheritance either.

Deal With The Debt Left By Deceased Parents

If your parent or parents do die in debt, seeking professional legal advice is the most prudent course of action. Surviving children should always get advice from a lawyer experienced in matters of wills and estates before simply trying to pay bills left by a deceased parent, without any proper planning. Getting the complete picture of the total debt amount and how to deal with it helps reduce the stress and gives you the right information to make the best possible decisions.

Because debts are not normally transferred in death, adult children trying to do the right thing and clear up old bills from their own pocket, are not always making the best choices, so understanding your rights and responsibilities is always recommended.

For example, an outstanding credit card bill must be paid back from the estate of any deceased person but if there is no estate to fund the debt repayment, the debt is wiped away, with no consequences to surviving adult family members.

Understand Your Rights and Responsibilities for Parental Debt

If a surviving relative co-signed on a credit card or other loan, they will be liable to pay it off in full – even after the death of the co-signee.

‘Authorised users’ listed on credit cards are not responsible for paying the outstanding debt of the card holder – but by being connected to the account, it may impact on your credit score. Authorised users should always contact the lender and request removal of their name from the account.

If you co-own a property with someone as “Joint Proprietors”, instead of the more common ‘Tenants in Common’, the surviving Joint Proprietor acquires the whole property automatically, in the event of the other co-owner dying. With that in mind, any property co-owned with a joint proprietor does not form part of the deceased person’s estate and cannot be used as part of an estate to pay back debt.

Discuss Debts for Clear Communication

The best advice for adult children facing the prospect of dealing with their parents’ estates one day, is to have an honest and open conversation while those relatives are still alive – clarifying what debts remain, what debts are held jointly and what wills are in place to make provisions for financial distributions and debts.

Looking after a deceased estate can be stressful enough without adding to the responsibility and leaving a will is always recommended to help ease the burden of the people left in charge of your legacy.

To discuss any issues related to personal loans or lending applications to assist your financial circumstances, talk to our team at Loans Actually today.

The contents of this article do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such. You should seek legal advice or other professional advice in relation to any particular matters you or your organisation may have.

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