Friday 19 July 2024

Heirs Beware: How Debt Can Impact Your Inheritance

Losing a family member can be difficult and any inheritance you might be receiving will be at the back of your mind. However, you still need to prepare yourself for receiving this inheritance and understand what to expect. Inheritance is usually received as part of someone’s Will and can include assets such as money, stock, or real estate. The distribution of inheritance is determined during the estate planning process and is a long process, documents need to be analysed and any wills taken account of.


When it comes to debt, there is often confusion as to whether this debt is inherited after someone’s passing. Usually, any remaining debt will be paid off by the deceased person’s estate and assets, if it is worth enough. However, what happens if there is no estate to pay off the debt? That’s what we will explore throughout this article.


With that being said, let’s take a look at how debt can impact your inheritance and whether heirs will have to inherit a family member’s debt after they pass because in these instances education is the ultimate power so knowing what happens, what it means and how you can get through the results of the investigation is very important for yourself and everyone around you. 

Can Debt be Inherited?

If no estate or assets are left behind to pay off the outstanding debt of a loved one that has passed away then the debt will usually die with them. Surviving relatives aren’t likely to be responsible for paying off the debt that never belonged to them unless they acted as a guarantor or a co-signatory of the debt.


This means that with no strings attached, you should not inherit any debt from a family member who has passed away. There are a few exceptions to this, which means that you can be responsible for the debt under particular circumstances.

What Kinds of Debt Can Be Inherited?

Debt can typically either be paid off by the deceased assets or it’ll die with them which you might be relieved to know, but unfortunately some types of debt can be inherited, it’s important that you look for legal advice in any of these cases just to make sure you aren’t paying something you can get out of. You could be responsible for inherited debt in these circumstances:

Joint Debt

If you had a joint account with the deceased, such as a joint credit card or co-signed medical bills, you will still be held responsible for the debt even after the joint holder passes. This means that you will be the one who has to pay off this remaining debt. According to the Consumer Financial Protection Bureau (CFPB), the only people who are not responsible for joint credit card debt are authorised users.

Community Property State Debts

The surviving spouse of someone who has passed away may be required to pay some of the remaining debt with community assets. This is only applicable to several US States including Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Alaska gives spouses the option as to whether or not they make their property community and pay off the debt.

Home Equity Loans

Inherited homes that have had a home enquiry loan on the property can also result in debt being passed on to surviving relatives. People will often take out home equity loans to enable them to raise money without having to sell their home. This can then help them to balance out debts or save up to buy something like a car. If you inherit a home with this loan in place, you will be liable for the potential debt.

How to Deal with Postmortem Debt

Debt collectors might come calling after a loved one has passed away with outstanding debts. There is no law against debt collectors contacting the spouse of someone who has deceased to identify who the admin of the estate and assets is. However, they are not permitted to claim that you’re responsible for paying off these debts unless it is for one of the reasons listed above. It’s important to familiarize yourself with how to deal with debt collectors so that you are not taken advantage of.


The Fair Debt Collection Practices Act (FDCPA) regulates what collectors are permitted to do. They are going against the Act if they threaten you, harass you, or claim that they will take your assets even though they aren’t entitled to them. This violates your rights and gives you the right to submit a formal complaint. If you feel as though you have been violated by a debt collector you can submit your complaint to the CFPB.


The CFPB advises that you hire a debt advisor if you suspect a debt collector offense. They will be able to help you better understand your rights and let you know if you need to file a formal complaint.

Dealing with Undisclosed Debts

The executor, who is someone named in the Will responsible for dealing with the estate, might notice a new debt that they knew nothing about. Placing a Deceased Estates Notice advertisement can be a good way to avoid being held responsible for this debt. This notice can be placed in a newspaper to show that you have done all you can to deal with any potential claims against the estate.


Creditors usually get given a day over two months to come forward after the date of the advertisement. If the executor distributes the estate and a creditor comes forward, the executor could be found personally responsible for the debt and have to pay it off themselves.

How to Deal with Debt as an Executor

The executor has the most important role when it comes to dealing with the Will, as they will have to sort out what debts need to be paid. Here are the 8 steps that executors should complete when sorting out the deceased’s Will and debts:


  1. Contacting creditors to explain the situation.
  2. Ask the creditors to send a statement outlining the debt owed.
  3. Ensure ongoing credit card payments are stopped by the bank.
  4. Make a note of any joint credit card accounts and notify the bank.
  5. Remove the name of the deceased from any outstanding joint debts.
  6. Include any relevant documents in the estate plan.
  7. Check all forms of paper and online storage for any other potential loans.
  8. Start to pay off any outstanding debt.


You should consider contacting a debt advice center or Xero Psg Approved Vendors if you are confused about how you should be dealing with debt after someone has passed away.