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Christian Living

Finance

Dave Says: Pay Parents Outstanding Debts?

Dave Says
Author Biography

Dear Dave,
My parents have never really handled money well and they aren’t prepared for their passing. They’re both getting up in years, so traditional insurance isn’t really an option. They also have a lot of debt. When they die, who will be liable for all that debt?
Tom

Dear Tom,
Any outstanding debt that your parents have upon passing will go against their estate. If necessary, their house may be sold by the executor in order to pay the debt. If they have a positive net worth – meaning they owned more than they owe – there will be money left over after the debts are paid and you’ll have an inheritance. If not – if they have a negative net worth – everything could be sold off to cover as much of the debt as possible. In any case, you will not be held liable for the remaining debt.

There is also the concern as to where money is coming from to cover their burial expenses. I’d suggest getting their permission to let you buy a burial policy on them. If they won’t agree to this, you may have to just save up the money yourself. In most states, about $10,000 - $15,000 is enough to cover burial expenses for two people.

It’s a tough situation, Tom. But at least now you’ve got some options.
-Dave

 

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