What Adult Children Should Know About Paying Off Parents’ Credit Card Debt

When parents pass away, even those who knew about their impending death well in advance often have a lot of emotional strain to bear. With so many things to think about after a loved one passes, it’s no wonder that stress adds to that emotional turmoil.

One element of that stress is often how to handle the deceased’s finances. When a lot of money or assets have been left behind, dealing fairly with it all – and distributing it between heirs – can be tricky. What is even more complicated is dealing with a parents’ finances when there isn’t an excess of money left behind.

Are children liable for paying off parents’ credit card debt? Here’s what you need to know about settling your parents’ debts and ensuring that you don’t end up with that weight on your shoulders:

What Typically Happens After a Parent Passes?

The amount of money that is involved in a person’s death can be astounding. When you’re already coping with loss, thinking about all of that financial information can be overwhelming – and perhaps the last thing you want to do. However, it is important to address these issues promptly so that you aren’t stuck wondering who will be stuck paying off your parents’ credit card debt.

In the best-case scenario, your parents will have created a will and appointed an executor to handle the task of carrying that will out after their death. This includes the distribution of their wealth. Rather than leaving relatives behind to squabble over assets, a will neatly assigns everyone their fair share and ensures that the process goes smoothly.

Unfortunately, that isn’t always how things play out. If there is no will in place, determining who gets what can be a little more difficult. Likewise, those who leave behind debt after their passing can also leave behind stress and confusion for their loved ones. Even moving into an assisted living or medical facility while dealing with debt can leave those who are responsible for the patients’ financial affairs with a lot more to deal with – all the more reason to seek the advice of a legal professional before your parents leave you with debt or tough decision to make.

How Does Debt Impact That Process?

What impact does debt have on the process of assets distribution after your parents’ death?

In the event of debt on the part of the deceased, the estate that they leave behind is responsible for handling the relief of that debt. In the event of very little debt, this has very little impact on the estate and its beneficiaries. However, a substantial amount of debt can be very different.

When there isn’t enough money or other assets in a person’s estate to cover the debts they leave behind, this can lead to insolvency – and creditors being left without compensation while loved ones are left without any type of inheritance.

Many people whose parents leave debt behind may worry that they will be liable for paying off that debt – and may lead to even more stress while coping with a significant loss.

Are Adult Children Liable for Paying Off Parents’ Credit Card Debt?

So, what happens if your parents leave behind a lot of debt? Are adult children and their siblings liable for paying off parents’ credit card debt?

Not usually. If there is not enough money allocated in the estate to cover the debts, most creditors will simply close out the account and forgive that debt. There isn’t typically any personal liability for those debts on the part of loved ones left behind after a person’s death.

Just as a person or business can declare bankruptcy, so too can a person’s estate. This is known as “insolvency”. It means that there are more debts than there are assets to cover them in a person’s estate. It also means that those who would receive money or other assets from that estate will end up with nothing.

While this may not sound great if you were anticipating a big payoff from your parents’ estate, it is important to note that insolvency allows for children to release their parents’ debt without shouldering any liability for it. For those whose parents were carrying multiple lines of credit or substantial amounts of debt, this is a great relief.

There is an exception to this rule, though. If you cosigned a loan of any kind with your parents, you are liable for the repayment of that debt in the event of their debt – or even their inability to pay. This means that if your parent is in a nursing home or medical facility and is therefore unable to repay their debts, creditors may contact you for repayment.

Understand also that if you are an authorized user of your parents’ line of credit, your scenario will be different than if you are a cosigner for the debt. Many elderly or ill people appoint their adult children as authorized users of their credit so that it can be used without them having to physically be present. If this was your situation, you are not liable for the debts your parents leave behind. You can expect those debts to be released the same way they would be if you were in no way involved in their financial business.

For more information about paying off parents’ credit card debt – and whether you’re liable for doing so or not – talk to the legal experts at the Van Horn Law Group. We can help you navigate the uncomfortable process of dealing with your parents’ finances after their passing and ensure that you aren’t saddled with their debts unnecessarily. Give us a call today to learn more!