As your parents are putting together their estate plan, they tell you that they want to name you as the estate executor. You’re going to be involved in the process of gathering their assets and distributing them according to the estate plan.
But you may know that your parents also have a substantial amount of debt as they make this estate plan. There could be major debts like car loans, business loans or mortgage loans. There could also be minor debts like income taxes, property taxes or credit card bills. If your parents pass away without taking care of all these debts, do you have to pay them?
You can use the funds from the estate
If you are the estate executor, then, yes, you may have to pay the debts for your parents. This is one of the duties that you have, and debts often need to be paid before the remaining assets can be passed on to the beneficiaries.
But debt is not inherited like assets are, so you and the other beneficiaries do not have to pay personally. Instead, you just take the financial assets that your parents owned, pay off their debts and settle those accounts. Once the accounts are closed, you distribute the rest of the assets to the beneficiaries. This could mean that you inherit less than you expected, but it doesn’t mean that you have to personally take on debt that your parents agreed to.
Paying debts and distributing assets are just two things that you need to do as an estate administrator. The probate process can be complex, so be sure you know about all of your legal rights and obligations.
