What if your parent dies more in debt than their estate can pay?

On Behalf of | Feb 14, 2023 | Probate and Estate Administration

Living on a fixed income after retiring is a challenge. In addition to inflation, which can lead to major budgetary shortfalls, older adults never know when illness or injury might lead to massive medical expenses. Surgery, rehabilitative care and rooms in nursing homes are all quite expensive and may leave someone with staggering amounts of personal debt to grapple with until they die.

If you will serve – or are serving – as the representative or executor of your parent’s estate, it will fall to you to pay their debts as part of the probate process. Will you end up responsible for any debts that you cannot pay with estate resources?

In most cases, repayment ends when assets run out

There are a few situations in which you may have direct responsibility for someone’s debts when they die. If you were a cosigner on the loan with them, then the debt obligation that they left behind will fully pass to you. In most cases, however, your obligation to repay a parent’s debt only requires that you use estate resources, not your own, to meet that obligation.

Notifying creditors of the death in writing is one of the most important steps in the process. You will then have to review all of the claims made against the estate in probate court. You’ll have to pay them in the proper order of priority, and almost all creditors will take precedence over the beneficiaries of the estate. Your primary source of possible liability comes from errors made in this process.

If you fail to notify or pay certain creditors, they could potentially bring a claim against you for the value of any estate resources improperly distributed to beneficiaries instead of being distributed in favor of their repayment.

Estate administration often requires help

You should not have to worry about personal financial responsibility for debts that you did not assume. It is an honorable thing to want to step up and handle your loved one’s estate, but you should not have to worry about losing your own resources for doing so. Getting adequate support and advice during estate administration will be crucial to your protection as the one handling an estate that involves significant debt.