Do Children Have to Pay for Parents' Debts When the Parent Dies?

When a parent dies, children do not have a responsibility to pay their parent’s debts, according to the Federal Trade Commission. Debts are typically the responsibility of the deceased person’s estate after death. In some cases, the surviving spouse has a limited responsibility for the debt, particularly in community property states. The terms of the deceased parent’s will, individual state statutes and the terms of a loan agreement dictate how debts are managed after death.

When a parent dies, outstanding debts typically pass to the estate for satisfaction. The executor of the estate, often named in the will, helps validate the legitimacy of the debts in accordance with the probate laws of the state of residence. With approval from the probate court, the executor pays legitimate estate debts prior to dividing and disbursing the assets to the beneficiaries. If necessary, assets will be liquidated to satisfy the debts. If the children are beneficiaries of the estate, they may not receive expected assets due to their parent’s accumulated debt.

Children do not have to pay for specific general debts, such as credit card balances and utility bills, when the parent dies unless they are also named as co-owners of the accounts. If the children are named as co-owners of the account, they will have to pay their share. The parent’s estate will pay the parent’s portion of the account, such as 50 percent if there are only two people listed as the account owners. If the children can prove that they did not incur any of the debt, the probate court may allocate the full portion to the estate. If the estate’s assets are not sufficient to cover the debt, the children will be responsible if they are named as co-owners. General debts may go unpaid if the parent is the sole account owner and if the assets are not sufficient to cover the balance.

Children do not have to pay the mortgage on their parent’s home after the parent dies unless they are named as the executor of the estate or if they are the beneficiary of the home. Typically, a home mortgage considers death a default of the mortgage loan, making the balance of the debt due and payable at the time of death. If the parents bequeath the home to their children subject to the mortgage, the children must pay the mortgage debt. If the home is bequeathed as not subject to the mortgage, the parent’s estate pays the debt and may then transfer the title to the children. The home may be sold by the estate or by the children to pay the mortgage debt.

Like mortgages, most vehicle loans include a clause stating that death constitutes default on the loan, making it payable in its entirety after the loan owner dies. The terms of a parent’s will should specifically state whether the estate proceeds should pay the vehicle debt. If children inherit the vehicle with a loan attached, they also have the option to procure their own financing or sell the vehicle.