When a parent falls seriously ill or dies, there are enough emotions riding high without throwing in financial worries that accompany these situations. But money troubles too often come part and parcel with aging parent issues.
A frequent concern of adult children is whether they are going to be responsible for their parents’ debts after they die. The answer is probably not, but there could be a couple of situations in which you are.
The elderly, living on a fixed income, may use up all of their savings and then run up credit cards to make ends meet. Your parent falls ill or dies, and the credit card or loan companies start calling. Are you responsible to pay it off?
No, you are not, not even for medical bills your parents may rack up in the last months of their lives. The only times you are responsible is if you are a co-signor on a loan (co-signors are equally responsible for the debt) or if you are joint account holder (not just an authorized user) and your income and credit history were used to obtain the loan or credit card. Having power of attorney for your parents does not make you liable for their debt, but if you abused your power of attorney or conservatorship for your parents, you would have to pay to pay money back.
The fact that you are not responsible for the debts will not stop bill collectors from calling you. If they continue to call, explain the situation to them and write a letter asking them to stop. You can also file a complaint with the Attorney General in your state.
Keep this in mind: Although you are not responsible for your parents’ debts, their estate is liable, which could affect your inheritance. After funeral expenses are paid, creditors will be paid out of the remaining estate, with secured creditors taking top priority. You are not responsible to make up the difference if there is not enough money in the estate to pay all the creditors.
Contact a financial planner or estate planning attorney for more information on financial planning or probate issues.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.