If an estate has debt, do heirs need to pay?

On Behalf of | Jan 10, 2022 | Estate Planning

Ideally speaking, heirs will find that the estate left behind by a deceased parent is going to contain more assets than debts. There are always going to be some debts, even if they’re just minor credit card debts for daily purchases, but it will generally not be anything serious.

But what if there is a significant amount of debt and limited amounts of assets? In a case like that, are they are expected to pay back the debt? Does it get inherited in the same way that assets do?

The estate has to pay, but the heirs do not

In short no, heirs are not going to have to pay back the debts that their loved one left behind. This may not be true in cases where they have co-signed on that debt or something of this nature, but general debts don’t need to be paid by the children of those who took on that debt.

Those debts do need to be settled, but this is the job of the estate executor, using the funds from the estate itself. These funds may need to be paid out all the way until they are depleted to take care of as much of the debt as possible, meaning the heirs will not inherit the money they may have assumed they would, but they don’t have to take out loans or pay the debt off using their own savings.

Financial complications can arise after someone passes away, especially if the estate plan was not created in such a way that it can fully deal with all of these hurdles. It’s important for heirs and beneficiaries to understand their obligations and the steps they need to take.

 

 

 

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