Losing a loved one can leave us with many unanswered questions. Although your children might not think about your assets, estate, or even your debt, the question remains: will your children inherit your debt. 

We know why this might be something on your mind. One of the most worrisome concerns for aging parents is the thought of passing on their debts to their children. Let’s explore whether children or heirs can inherit debt, situations where debt can be inherited, how creditors pursue payment of debts after someone’s passing, and essential ways to protect your heirs from inheriting debt.

Can Children or Heirs Inherit Debt in California?

The question of whether children or heirs inherit debt depends on various factors. In most cases, children are not personally responsible for their parents’ debts unless they have co-signed or jointly hold the debt. However, certain situations can lead to debt inheritance, and it is essential to understand these circumstances to protect your family’s financial well-being.

Situations Where Debt Can Be Inherited

Debt can be inherited in California under the following circumstances:

• Joint Debts: If a child or heir co-signed or jointly held a debt (like a credit card) with the deceased, they may become responsible for the outstanding amount.
• Estate Debts: If someone inherits an asset from the estate, and that asset has a secured debt linked to it (such as a home mortgage or car loan), the debt will also be passed on to the inheritor along with the asset. In simple terms, if you receive something valuable that has a loan connected to it, you will be responsible for paying off the loan along with owning the item, unless you are willing to forgo that item in a foreclosure.

How Creditors Pursue Payment of Debts After Someone’s Death

Creditors have the right to pursue payment of debts after someone’s passing. When an estate enters probate, creditors are given a window of 60 days to file a claim from the date the estate executor notifies them. If the deceased person did not appoint an executor, creditors have four months after a representative is appointed by a California probate court to take action.

While creditors have the first chance to make claims on the deceased person’s assets, they cannot hold heirs financially liable for the debts. Creditor claims are settled with the estate of the deceased—not the heirs themselves. In simple terms, the debts are paid from the assets left behind, and the heirs are not responsible for the debts personally.

Creditor Prioritization in California

Section 11420 of the California Probate Code outlines the order of priority for settling debts from the deceased person’s estate. Generally, secured debts, such as mortgages or car loans, take precedence, followed by unsecured debts, like credit card debts and medical bills.

Ways to Protect Your Heirs from Inheriting Debt

To safeguard your heirs from inheriting debt, consider taking these proactive steps:

• Estate Planning: Creating a comprehensive estate plan can help manage and allocate assets, ensuring your debts are properly handled and minimizing the burden on your loved ones.
• Revocable Living Trust: Establishing a revocable living trust allows you to transfer assets to the trust, avoiding probate and providing clarity on how your debts should be settled.
• Life Insurance: Life insurance can serve as a valuable financial resource for your heirs, providing funds to cover debts and other expenses.

At Hermance Law, we understand the importance of securing your family’s financial future and protecting your heirs from undue debt burdens. Our experienced team of estate planning and crisis planning attorneys is here to guide you through the process and ensure that your wishes are respected.

Don’t wait to address this critical matter. Contact us today for a free consultation and take the first step towards safeguarding your family’s financial well-being. At Hermance Law, we are dedicated to providing you with the expertise and support you need for peace of mind.