Can you inherit debt?

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It’s a worry every parent has: Am I going to pass on my debt to my children?
With the U.S. moving farther and farther into debt, it’s becoming a bigger concern for more people.
Between credit cards, mortgages, and student loans, the average American has over $200,000 in debt. Even with life insurance, most won’t have enough to cover both funeral costs and their outstanding debt.

So, does that debt get passed down to your children?
While generally the answer is no, laws do differ from state to state and some parts of debts may need to be paid.
Here’s a look at different debt situations and what the law says about them:
Can my unpaid debts affect the inheritance I leave?
In general your children won’t have to pay your debts, but they could see their inheritance diminish as creditors deplete your assets to cover your debts. Again, the laws involving the impact of parental debt on inheritance are complex.
For example, your pension or IRA can be tapped by creditors to cover debts, which could reduce the amount of inheritance your children receive; however, you can avoid this by listing one or more of your children as beneficiaries to your pension.
Can my children be forced to pay my credit card debts?
If you die with credit card debt, your children can’t be forced to pay it, but these debts can be collected from your estate, reducing the amount of inheritance you leave your children.

Be warned, debt collection agencies sometimes attempt to persuade adult children that they’re responsible to pay their deceased parent’s credit card debt. The law does not permit them to contact children in an attempt to collect these debts (except in cases in which the child is also executor of the estate), but some will still try to do so.
To protect yourself, you and your children should familiarize yourselves with the laws that cover unpaid credit card debt.

If you have questions regarding your situation, please call us for a free consultation.

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