Can You Inherit Debt from a Deceased Family Member?

In most cases, you cannot inherit a loved one's financial obligations.

When someone dies, his family and friends inherit his worldly goods unless his will specifies otherwise. If the deceased carried a high amount of debt, his loved ones may assume that they will inherit his debt in the same way they inherit assets. Fortunately for the deceased’s family members, this is not often the case.

Collection Activity

Creditors cannot force you to pay off someone else’s debts -- even if that individual is a close friend or family member. Unethical creditors and collection agents sometimes lie to grieving family members, telling them they are legally liable for the deceased’s debts. Regardless of what your loved one’s creditors tell you, they frequently have no grounds on which to sue and cannot garnish your bank accounts or paychecks.

Probate Court

Unless your deceased family member’s debts exceeded her assets, her estate is managed by the probate court in her county. Creditors can file claims for payment with the probate court. The court allocates payment to eligible creditors before closing the estate and turning any remaining money over to the deceased’s heirs. Creditors that do not file with the probate court must write off the deceased’s debt as a loss.

Secured Debt

Although creditors cannot force family members to pay off secured debts the deceased owed, they can repossess the collateral that originally secured the loan. If you inherit real estate or a motor vehicle that carries a lien, you must continue making payments on the asset. If you do not, the creditor that holds the note will seize the asset and sell it.

Exceptions

In certain situations, a deceased person's family members do inherit his debts when he dies. One way you could inherit a loved one’s debt is if you shared a joint credit card with that person. Both account holders on joint accounts are equally responsible for making payments. Even if your deceased loved one made the credit card payments each month, responsibility for making those payments transfers to you upon his death if you shared the account.

Stop Creditor Harassment

If creditors continue to call you demanding that you pay debts your family member owed, send the creditors copies of the deceased family member’s death certificate and a written statement demanding that each creditor direct any further inquiries to the probate court and stop contacting you.

The Fair Debt Collection Practices Act forces all third-party collection agents to stop contacting an individual when she places her wishes in writing. Although original creditors, such as credit card companies, are not third-party creditors, some states, like California, have laws in place that require original creditors to honor the FDCPA’s collection guidelines.

References

• "The New York Times"; You’re Dead? That Won’t Stop the Debt Collector; David Streitfeld; March 2009
• Dummies.com; Probing Probate – What You Should Know; N. Brian Caverly Esq. et al.; February 2010
• AOL Autos; What Happens to Car Payments If You Die?; Josh Max; November 2009
• Federal Trade Commission: The Fair Debt Collection Practices Act; 2009
• Privacy Rights Clearinghouse; Debt Collection Practices: When Hardball Tactics Go Too Far; July 2011

Resources

• Bankrate.com; Don't Rush Financial Decisions When Spouse Dies; Laura Bruce; 2011
• MSN Money; When Your Parents Die Broke; Liz Pulliam Weston; 2011
• AARP Life Insurance Program; Tips for the Executor; 2010