Do You Inherit Your Parents' Debt When They Die in New York?

When parents pass away in New York, many people worry about inheriting their debts. The good news is that you usually won't have to pay your parents' debts from your own money. Their debts belong to what's called their "estate" - all the money and property they owned when they died.

However, these debts might reduce how much you inherit. Before any inheritance is given out, your parents' estate must first pay off their debts. If there isn't enough money in the estate to pay all the debts, you might receive less inheritance than expected, or possibly nothing at all.

When Are You Responsible for Your Parents' Debts?

You only become responsible for your parents' debts in two situations:

• You cosigned on a loan with them
• You guaranteed to pay one of their debts

If neither of these applies to you, debt collectors cannot legally make you pay your parents' debts. Sometimes debt collectors might contact you about your deceased parents' debts. They're usually just trying to get information about the estate. You should tell them to contact the person managing your parents' estate (called the executor) instead.

How Debts Get Paid After Someone Dies

The executor of your parents' estate must pay all debts before giving out any inheritance. If there isn't enough cash to pay the debts, the executor might need to sell other property from the estate. The money from these sales goes to pay the debts first. Whatever money is left after paying debts gets distributed to the heirs.

Secured Debts

A secured debt means something valuable was promised as payment if the debt wasn't paid. Here's how common secured debts are handled:

House Mortgages

If your parent had a mortgage, several things might happen:

• The house might need to be sold to pay off the mortgage
• If someone inherited the house, they'll need to keep making mortgage payments
• If someone co-owned the house with your parent, that person becomes responsible for the full mortgage

Car Loans

Cars with loans work similarly to houses:

• The car might need to be sold to pay off the loan
• If you want to keep the car, you'll need to take over the payments
• If payments aren't made, the lender can take the car back

Unsecured Debts

Unsecured debts aren't backed by any property. Here's how they're typically handled:

Medical Bills

Medical bills must be paid by the estate before any inheritance is given out. If there isn't enough money to pay them, the remaining bills usually get cancelled.

Credit Card Debt

Credit card companies can only collect from the estate's money and property. If you didn't share the credit card account with your parent, you won't have to pay these debts.

Student Loans

Federal student loans are cancelled when someone dies. Private student loans depend on the loan agreement - some are cancelled, while others must be paid by the estate.

Special Protection for Certain Assets

Some types of assets are protected from debts. These are called "non-probate assets" and include:

• Life insurance payments
• Retirement accounts (like 401(k)s or IRAs)
• Property owned jointly with someone else
• Assets in a living trust

These protected assets usually go directly to the named beneficiaries without being used to pay debts.

Getting Help

If you're worried about your parents' debts, consider talking to a lawyer who specializes in estate law. We at the Law Offices of Albert Goodwin, PLLC are here for you. We can explain your rights and help protect your interests. Wherever you are in New York City or the surrounding areas, we can provide assistance. You can reach us at 212-233-1233 and speak to an attorney.