Your parents may have far more assets than you, something that is growing more common as the wealth gap expands in the United States. You know that you will eventually inherit those assets as part of their estate plan.
However, you are also worried that they may have extensive debts that are more than you can afford. Maybe they have multiple properties, numerous credit cards and much more. Maybe you’re worried about the taxes that they’re going to owe or if they still have a mortgage on any of their properties. No matter what the debt looks like, are you going to inherit that as well?
The estate pays the debts via the administrator
You don’t have to worry about inheriting the debt. It will not be assigned to you or anyone else who is part of the estate plan. The only way this happens is if you already cosigned on a loan or a line of credit with your parents. But if you were uninvolved with their debt, you’re not going to have to take it on at the time of their passing.
Debt still does have to be addressed, and that is done by the estate administrator. When they take inventory of all the assets, they also consider what is still owed. They then use the financial assets to pay off the debt that remains, and any assets beyond that get distributed to the heirs.
This can be a fairly complex process, and some heirs do still feel like they are “losing” money because funds they expected to inherit have to be used to pay outstanding debts. It’s very important to understand all the legal steps to take at this time.