As a general rule, children do not inherit their parents’ debts. If a parent passes away and still has remaining credit card debt, for instance, the estate executor uses funds from the estate to pay down this debt. Children may inherit a smaller amount of financial assets if some of them have to be used to pay off debts, but they don’t inherit the debt itself.
When it comes to family homes, many children inherit a parent’s home after it is completely paid off. It is simply a material asset. The child can take over as the new owner and then take on the responsibility of paying property taxes and other expenses.
What happens if there is still a mortgage on the home?
If there’s still a mortgage on the home, that obligation remains. A child who decides to become the owner of their parent’s home after it has passed down has to make a decision. One option is simply to assume the mortgage and begin making payments as their parent was doing before them.
However, there is another option: Selling the house. A child who doesn’t want to take on this level of debt could sell the home, which may be worth more than the remaining balance on the mortgage. If it is, the child can use the proceeds from the sale to pay off the rest of the mortgage. They can then keep any additional profits themselves as their inheritance.
Navigating the complexities of inheriting real estate
Inheriting real estate can be complicated, especially when there are issues with debt and financial obligations. Those involved in the estate planning and probate process need to consider all of this carefully while looking into their legal options.