Losing your parents at the same time or within months of each other is a very difficult situation to face. Handling your emotions is hard enough, let alone handling their estate. You may be at a loss of what to do, especially when you realize that they passed on when they were broke.
What do you do when your parents left a large amount of debt and not enough money and assets to pay it back? Do you have the responsibility to cover your parents’ debts?
Who repays the debt?
Any possible repayment will come from the estate and not your pocket or that of any other family member. The only exception is if you or another relative co-signed the loan or credit card. Unless this is the case, you have no obligation to pay any of the debt, so do not listen to what creditors tell you. The executor is responsible for administering the estate to satisfy creditors.
How does repayment happen?
Florida dictates who receives payments first. For example, legal and court fees are at the top, with funeral costs following behind. If after paying back as many creditors as possible there is not enough money to cover the rest, the remainder may go to the other creditors in proportion to their claims.
You do not have to worry about your inheritance going toward debt payments if your parents properly created their estate plans. Many assets have protection from creditors, such as life insurance policies and retirement accounts that name beneficiaries. Those will go straight to heirs. If no beneficiaries are on the accounts, then the estate will get the assets, which may end up paying off the debt.
Specific circumstances can complicate the matter, so it is best to rely on professional advice to avoid making a mistake if you are the executor, or if you are not the executor, to know when that person is not properly fulfilling the duty.
