Inheriting Debt

Authored by , LegalMatch Law Library Managing Editor and Attorney at Law

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What Happens When a Person Dies With An Unpaid Debt?

Generally, all debts of a deceased person must be paid off before any assets can be distributed to the benefeciaries.  Typically a will controls financial affairs after a person's death by distributing assets and directing for the payment of debts.  The person who oversees this process is the executor, who is named in the will or appointed by the court.  

If there are unpaid debts, the executor sells off the assets of the deceased person and uses the proceeds to pay off as many debts as possible.  Payments are made as follows:


Can A Person Avoid Paying Their Debts By Giving Away All Their Assets Before Death?

In some circumstances, people attempt to give away their assets before dying in an attempt to avoid leaving the money to pay off debts.  This may not be successful, because Creditors have the right to seize the assets and reverse the gifts after death if the transfers were done solely to avoid legitimate creditors.

Can Children Inherit Their Parents' Debts?

Children that are not a party to a debt prior to their parent's death cannot inherit a debt.  An exception are debts from a joint account of both the parent and child, in which case the child is responsible for the unpaid debt.

Will an Attorney Be Helpful In Determining What Debts are Inheritable?

An estate planning attorney can provide valuable assistance when dealing with possible financial responsibilites you or your children may possibly encounter when planning out your estate.  An experienced attorney can advise you of your legals rights as well as possible remedies you may have.

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Last Modified: 08-15-2011 04:36 PM PDT

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