Adult children often inherit their parents’ assets. If someone dies intestate (without a will), the division of assets is done according to state law. If the person has an estate plan, that plan will generally be followed, and the estate administrator will divide the assets among the beneficiaries. Anyone named in the estate plan can potentially be a beneficiary, even if they are not a child or a direct descendant.
However, it is common for someone to pass away with remaining debts in addition to the assets they own. Are their children required to inherit and pay off this debt? Or is the debt forgiven by creditors, such as credit card companies, mortgage lenders, or even the government in the case of property taxes or income taxes?
The estate administrator pays the debt
The estate administrator is responsible for distributing assets, but they are also in charge of using those assets to pay off any remaining debts. Before financial assets can be distributed to beneficiaries, the administrator may need to pay credit card bills, taxes owed to the government or other outstanding financial obligations.
This means that children will not inherit their parents’ debts directly. However, they may receive fewer assets if a portion of the estate is used to pay off debts like back taxes or other costs. Additionally, if children inherit assets that come with debt—such as their parents’ home, which still has an unpaid mortgage—they may need to decide whether to sell the property or assume responsibility for the loan.
Navigating estate administration
Estate administration can be complex, and all parties involved need to understand their legal rights and options to navigate the process effectively. It can help to seek experienced guidance at this time.