Can you inherit debt? What you need to know

The loss of a loved one can be devastating, and finances may be the last thing on your mind as you navigate grief. That's understandable, and it's okay to take some time to process what's happened. 

When you feel ready, you can turn your attention to sorting out your loved one's affairs. That may include debts they've left behind. Debt doesn't go away when someone dies, but who is responsible for it? We'll explain what happens to debt when a debtor passes away.

What happens to debt when someone dies?

When someone passes away, their estate has to be managed. An estate is what someone owns. For example, your estate might include your home, your bank accounts, and your vehicles.

Managing an estate includes figuring out what to do with the deceased person's debts. If they leave behind a home or other property, it can go toward paying their debts. The property is sold, and the money from the sale goes to pay the deceased person's creditors. 

What if there's no estate? The next question becomes whether there's someone else who's responsible for the debt. 

Can you inherit debt? 

Generally, you can't inherit credit cards, personal loans, or other debts from someone when they die. Any debts they owe would instead be paid by their estate, if they have one. If there's no estate, then the debts could go unpaid. 

When someone passes away, their heirs could inherit their property. Say your mother owns a home and you're her only child. That home would pass to you when she dies unless she has a will that states otherwise. 

Inheritance is how wealth transfers from one person to another. You don't have to be someone's relative to inherit from them. They can name you in their will to receive any of their property they want you to have.

Debt doesn't work like that, though. Credit card bills, for instance, aren't passed down like a family heirloom. In some situations debt could become yours when someone passes away.

When is debt inherited? 

You could inherit debt if one of several conditions applies to you. Debt can be passed on to you if you:

• Co-signed a loan with someone else

• Are listed as a joint account owner for a shared credit card 

• Were married to the deceased person, and state law requires you to repay a particular type of debt they owed (for example, spouses may be held responsible for each other's medical debt)

• Live in a community property state that requires you to use jointly owned assets to pay your spouse's debts

Co-signing means you agree to let a lender check your credit and financial information for loan approval. It also means you agree to be equally responsible for the debt with your co-signer. Likewise, a joint account translates to shared responsibility for a debt in the eyes of the law.

Lenders aren't concerned with how you're related to the person who passed away. If you co-signed a loan or opened a joint credit card account with someone, then you're legally responsible for the debt. It won't matter if they were your parent, child, sibling, spouse, or best friend. 

There's an exception for authorized users. An authorized user is someone who is added to another person's credit card account and has purchase privileges, but doesn't actually own the account. Generally, if the primary account holder passes away, the authorized user isn't left with the debt. 

What to do if a debt collector contacts you about a deceased person's debt

You may feel secure in the knowledge that you can't inherit someone's debt when they die, but that doesn’t always stop a debt collector from trying to get you to pay it. And even if a debt collector isn't trying to get you to pay, they could still contact you about a debt if you're the deceased person's spouse or you're in charge of managing their estate. 

Here are a few tips for handling communications with debt collectors when someone dies.

• Know your rights. The Fair Debt Collection Practices Act (FDCPA) protects you against unfair and unethical treatment by debt collectors. Get to know what a debt collector can and can't do, and what you can do next if you believe your rights have been violated. 

• Document everything. A paper trail can be your ace in the hole if a debt collector attempts to sue you for someone else's debt, or you think they've violated your debt collection rights. Make a note of when you talk with debt collectors and what was said. Better yet, limit all contact to email or paper mail so you have it all in writing. 

• Ask for validation. If a debt collector claims you owe a deceased person's debt, you have the right to ask for validation. Sending a debt verification letter requires them to confirm the details of the debt. If they hesitate or refuse to provide this to you, that could be a sign you're dealing with a scammer. 

• Consider talking to an attorney. When you lose someone, it can be difficult to focus and stay organized. Talking to an attorney can help you figure out what you're responsible for when it comes to debt, and what to do next if a debt collector is contacting you for payment. 

What if it turns out that you're responsible for the debt because you're a co-signer, joint owner, or surviving spouse in a community property state? You might talk to a credit counselor about what to do next. A credit counselor may recommend a debt management plan (DMP). If you’re not a candidate for a DMP, debt settlement or bankruptcy might be what's best for your situation.