Saturday, June 21, 2014

Can you inherit your dead parents debts? Another warning about filial responsibility laws

CNN Money has published a new article by Jeanne Sahadi, “Can you inherit your dead parents’ debts?”, link here. The article recoups some important points.

Of course, all debts still in the estate must be settled before money can be distributed to beneficiaries.  Generally, outside of the estate, adult children or other beneficiaries are not responsible for the parents’ debts on their own.

But there are some caveats.  The article mentions that up to thirty states have filial responsibility laws, a topic not often discussed.  If there is not enough money in the estate, then adult children in these states can be held responsible for leftover medical bills or nursing home and caregiving bills with their own funds.  These laws have not been enforced often.  Outside of the Pittas case in Pennsylvania (discussed here May 22, 2012) I am not aware of another case recently where this has happened.

However, if parents used Medicaid, in most cases states can recover Medicaid payments from estates made between ages 55-65. 

Estates must continue to make mortgage payments, which would become the responsibility of whoever inherits real estate.  Lenders cannot call in mortgages.  But upsidedown mortages present problems discussed in the article.  In spousal situations, people have sometimes sold property to pay taxes, which is one reason why same-sex marriage has become an issue.  

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