The death of a parent is a difficult experience at any age. Adult children who lose a parent deal with the added stressor of realizing a parent left debt behind. In the past decade, we've seen a steep increase in debt among senior households. According to a report from the Employee Benefit Research Institute, nearly half of families age 75 and older have an average of roughly $37,000 in debt.
Most senior debt is tied to housing expenses, but auto loans, medical bills, credit cards, and student loans also factor in. If you think your parent may die with debt, here are some things to remember:
You are usually not personally responsible. When a person dies, his debts are typically owned by his estate. When the estate does not have enough assets to cover all the debt, those bills usually remain unpaid and creditors take the loss.
The executor will need to sell estate assets to satisfy any debt, but if there are still bills left over, you are likely not personally obligated to pay. An important exception to this is medical bills.
Certain assets are protected. If you directly inherit protected assets, which are assets like life insurance policies or retirement benefits naming you as beneficiary that do not pass through the estate, you do not have to use those funds to pay your deceased parent’s debt.
This does not mean collection agencies will leave you alone. Debt collectors may continue to call you or try to guilt you into paying. You should keep notes of who calls you, which days and times they call, and what they say. If you have this problem with a collection agency, talk to the attorney managing the probate. Costs of administration like court fees and professional fees are a priority debt, which means the probate attorney is paid before other bills and likely will not have to be paid by you personally.