Both adult children and their parents are usually well aware that those children are going to inherit their parents’ assets. These could be strictly financial assets like investments, savings or even life insurance policies that will pay out upon the person’s passing. They could also be tangible assets like a home, a car, a jewelry collection or commercial property.
But most parents will hold both assets and debts at the time that they pass away. Those financial responsibilities are not just canceled when the person passes, so does that mean that the children are also going to inherit those debts?
The estate should cover the debts
There are some cases in which parents and adult children will be co-owners on a loan or something of this nature. If so, the child is still responsible for that obligation, even after their co-signer passes away.
But in general, no, children are not just going to inherit debts. A parent may owe credit card bills, income taxes, property taxes and much more. These do not become the responsibility of the next generation automatically.
Instead, funds from the estate itself should be used by the estate executor to pay down these debts. If a parent has $100,000 when they pass away but still owes $10,000 on a credit card, for example, the executor settles the credit card account. They then distribute the remaining $90,000 to the beneficiaries in accordance with the estate plan.
This is part of the reason why it is so important to have a comprehensive plan in place and to select the right estate executor. Those going through this process may find it helpful to work with an experienced attorney.