by Gary Foreman

If your aging parents are carrying a lot of debt, you may be wondering if it has to be repaid upon their passing and whether you might be left paying their bills. Here’s what you need to know about how debt typically gets handled upon death as it pertains to surviving heirs.

Dear Gary,
I have been thinking about my parents’ debts and what will happen when they die. They have no life insurance or savings, so I will have the responsibility of burying them. They have utility bills, criminal fines and hospital debts. Will I be made to pay these bills off once they are deceased?

I was also thinking of buying life insurance on them to help with the funeral expenses. Do you think it is more likely that everyone who is owed money will try to take it from the insurance policy than if they died with no insurance or anything at all?
Ellen

Ellen faces a common problem. Many of us will need to deal with our parent’s estate. If we’re fortunate, our parents will have accumulated more assets than debts during their lifetime. Maybe even leave us a few dollars.

Sadly, that’s not Ellen’s situation. In fact, she needs to be careful that she doesn’t accidentally “inherit” her parents’ debts.

Should You Buy Life Insurance To Help Cover Parents’ Funeral Costs?

We’ll begin with the second part of Ellen’s question. She’s correct to worry about funeral expenses. It’s estimated that the median cost of a funeral with a burial in 2023 is $7,848. Opt for cremation and the average is a little less at $6,970.

If her parents have any savings at all, most states will allow some of it to be used for burial expenses even if there’s not enough savings to repay debts. She’s wise to consider buying life insurance in an amount sufficient to pay for her parents’ funeral and burial. Also remember that in most cases the state is only required to provide the barest minimum for people dying without resources. And, remember that funeral costs could go up in the future. Buy a policy big enough to cover your needs.

The life insurance policy probably won’t put cash into her hands in time for the funeral. Ellen can expect the cemetery to want payment before allowing interment. Most do. So she’ll still need to have some cash or credit available for a short period.

The insurance should not attract creditors as long as the policy is payable to Ellen. And if she has not assumed responsibility for any of the debts, the insurance proceeds have nothing to do with them.

Can You Be Held Responsible for Your Parents’ Debts?

This leads us to the bigger question. Is Ellen responsible for any of her parents’ debts?

First, parents can’t just “leave” you debts in their will. It would be a neat way of repaying your kids for their rebellious teen years, but the law doesn’t allow it. Debts that your parents owe at the time of their death will either be paid out of their estate, paid by other living people who have previously assumed a responsibility for the debt, or be written off as uncollectable by the creditor.

It is unlikely that Ellen is liable for her parents’ legal or hospital debts. If she had been a party to the lawsuit or guaranteed the hospital bill, she would have known it. Same thing is true with utility bills. Unless her name is on the account or she supplied her credit card number, she should not have any responsibility for an unpaid bill.

Expert Interview: Financial Paperwork and Information Your Elderly Parents Should Have On Hand

How Can You Avoid Being Responsible for Your Parents’ Debts?

The next question is how can Ellen make sure that she doesn’t become responsible for any other debts that her parents might incur before death. If she’s not careful, she could unwittingly assume them. Ellen will want to avoid any joint accounts with her parents. For instance, if she deposits money into a joint checking account, that money can be taken to pay her parents’ debts.

Joint credit card accounts pose another danger. If you are named on the account, you will be responsible for all of the debt on that account even if you never used the card. You’ll know if you’re a joint account holder because you will have had to sign an application or apply online for the account. A call to the credit card company can verify your status.

A joint account is different than being an “authorized user” on a credit card. That’s when you are allowed to use the credit card, but are not responsible for the debt. Although the authorized user is not required to make payments on the account, the account will be included in calculating the authorized user’s credit score. So if your parents are bad about paying their bills, do not become an authorized user on their account. In fact, even if they have a good credit history, as they get older, it’s possible that Ellen’s parents will forget a bill and send it in late. That would hurt Ellen’s credit score as well as their own.

Related: End-of-Life Planning Everyone Needs To Do

What If My Parents’ Creditors Contact Me?

Finally, remember that creditors can try to collect from anyone. Ellen might get calls from her parents’ creditors demanding payment. But, unless she’s legally responsible for the debts, there’s no reason to send them any money. Just tell them not to call and hang up.

• Helping an Elderly Parent When Their Mate Dies: Financial Chores
• What Happens to My Debts When I Die?
• 5 Ways To Reduce Resistance When Helping Aging Parents With Finances

Reviewed July 2023

About the Author

Gary Foreman is the former owner and editor of the After50Finances.com website and newsletter. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com.