Can Your Loved Ones Inherit Your Debt?

There is an alarming trend that shows more and more people are carrying their debts into retirement with them. Some of these people are intentionally increasing their credit card debt with no plans to pay them off.  Their reasons vary from necessities of life to vacations and everything in between, but this leaves their loved ones with a question that needs answering – can family members inherit debt?

Inheriting debt is a terrifying thought and it creates tremendous stress in those who know they will survive a loved one. After all, when a loved one passes away and you’re named in a will to inherit possessions or other assets the idea of creditors taking from your inheritance is alarming.

Things are not as bad as it may seem.  When an individual passes away, the person in charge of settling the estate is the executor; and this is a person you have named in your will or in the case of no will, the courts generally appoint the executor.  The executor’s job is an honor yet it can be a burden as well.  An executor is in charge of the deceased person’s property and assets until all debts are cleared.  Whatever is left over then goes to who is named in the will.

Stack of MoneyLaws in the United States protect loved ones from inheriting debt – with one exception, if you are a joint debtor or co-signer.  If there are any assets at all, the executor will use what there is to pay off debts in order of priority.  In the event that all assets are used up and there are still debts to be paid, those debtors are out of luck and get nothing.  If there are any assets remaining, then the next of kin will be the recipients unless there is a will that states specifically who gets what.

If you are a joint debtor or co-signer to the deceased then it becomes your responsibility to pay off that shared debt.  For example, if you share a joint credit card with a loved one who passes away and there is an outstanding balance, then this is now your responsibility to assume.  The same rule applies for a mortgage, bank loan, car loan or any joint debt.

There is one other exception to this rule.  If you were in a position of legal responsibility for an individual’s finances while this person was alive (for example, a parent in a nursing home) and you spent their money on yourself instead then you become responsible for paying it all back.  This is referred to as being abuse of power of attorney or conservatorship.

Many people who have survived their loved one have experienced harassment from unethical collection agencies.  Some collections agencies have used pressure tactics in order to manipulate a vulnerable next of kin into paying the debts left behind.  These agencies have used several ways including using the line that it is the moral obligation to pay off their loved one’s debt.  These are despicable tactics and it’s crucial to remember that unless you co-signed a loan or were a joint debtor on a credit card or other loan, you owe nothing to anyone when your loved one passes away.

Free Newsletter to Keep you Free From Broke!Name: Email: We respect your email privacyPowered by AWeber email marketing
Published or updated December 6, 2012.


  1. Those collection agencies that try to use the moral argument are SCUM. Just disgusting to harass a grieving individual to pay off the visa bill. They had notice of the person’s death they should come after the estate.

  2. Jenna, Adaptu Community Manager says:

    What happens if the deceased’s debt is larger than their estate?

  3. When departing, leaving in black is better than leaving in red.

  4. I personally think it is better to strive to be debt free than to take the stress of debt into retirement years. I had a friend who was being harrased by her son’s credit card companies after he died in an accident. It was horrible for her. It is shameful that companies get away with tatics like this.

  5. No Debt MBA says:

    I think co-signing student loans would be the harshest example of this. Imagine putting your child through school and having them suddenly pass away only to be forced to continue to pay off the education that is now gone.

  6. FERDINAND CHE says:

    I still don’t understand something. If the assets handed down to the next of kin are more than the debts, is he/she not entitled to pay such debts?

  7. Rebecca Chandler says:

    If life insurance was awarded to next of kin, would debt be paid from that first, then anything remaining go to named loved ones?

What Do You Think?