Many types of debts still have to be paid even if someone passes away. Tax debt is one example, as the government still may want payments for property taxes or income taxes. Another example could be a car loan or a home loan. There are also minor costs like utilities or credit card payments.
But if someone passes away and their assets are transferred down to the next generation, is that generation also expected to take on their debt? Would the children have to pay back the money that their parents owed because they would inherit that obligation?
Paying the debt with the estate
There are some cases where children are joint account holders or cosigners on a loan, and they may be responsible for debt. But as a general rule, they are not required to pay back money owed by their parents.
Instead, the money from the estate should be used to pay off as much of these debts as possible. This does mean that the children may not inherit as much money, if the debt needs to be paid down first.
The person in charge of making these payments is usually the estate executor. One of the elderly person’s children may have been named as the executor. In that sense, they are responsible for the payments, but they do not have to use their personal funds to make them.
Options and obligations
Working through this process can be very complex. Adult children who are involved and considering assets, debts and other obligations need to know about all of the legal options they have.