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Our father said in his will that my sister and I would inherit his house. We should sell it and repay his huge debt, and then we can distribute any leftovers.
Are my sister and I responsible for the unpaid debts of selling the house? So do we have to bear financial responsibility for his massive consumption habits when he was alive?
-M.
Dear M,
The worst-case scenario that sounds like you and your sister will not get the inheritance. But the good news is that you and your sister will not inherit a lot of bills.
I assume you and your sister didn’t Co-sign loan For your father, and you do not own property together. In this case, you may get into trouble because of his debt.
Otherwise, when your father dies, his property and debts will become part of his estate. Then, the probate court decides how to distribute the assets according to his wishes while ensuring that the creditors are paid. (With some exceptions, the asset completely avoids probate. For example, if he is in a Retirement account, It will be provided directly to anyone listed as a beneficiary, as will any life insurance benefits. )
If your father Die of debt more than assets, His estate will be declared bankrupt. This means that there is not enough money to pay off all debts. The probate court will decide which debts receive the highest priority.
Funeral and probate expenses are listed as debts, and these are usually considered the highest priority by the courts. Other priority claims include medical bills, pending judgments, and-surprisingly-money owed to the IRS. Unsecured debts, such as credit card balances, have the lowest priority.
If the creditors cannot repay in full, you and your sister will not get any proceeds from the sale of your father’s house. But they cannot sue you and your sister for debt. If your father’s estate is not enough to pay all his debts, some creditors will be unlucky.
In summary, don’t be surprised if a debt collector contacts you after your father’s death. Debt collectors know that in most cases, the surviving non-spouse family members are not responsible for paying the debts of the deceased relative. But there are also many unscrupulous debt collectors.
Check Position at the Federal Trade Commission Regarding the handling of debts of deceased relatives. If you suspect that a collector is violating the rules, you can file a complaint with the FTC. If you have any questions about whether you need to repay debts, be sure to contact a lawyer.
Your father may not be good at financial management. Since he has a huge debt, you and your sister should assume that you won’t get anything from his estate. But no matter how messy his financial situation is, you shouldn’t lose sleep because you are worried about being responsible for his unpaid bills.
Robin Hartill is Penny Hoarder’s certified financial planner and senior writer.Send your tough money questions to [email protected] Or chat with her Penny Hoarders Community.
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