Instead of fighting with siblings over an estate matter, many baby boomers are now facing a totally different estate administration conundrum — sorting out the mess when their parents died outright broke or heavily indebted. This scenario plays out far more often than one would suspect. In fact, in 2012, the National Bureau of Economic Research conducted a study that determined almost 50% of senior citizens pass away with less than $10,000 in assets.
At the same time, the debts for senior citizens are on the rise. In past generations, it was unusual to find senior citizens still owing mortgages. But this is becoming far more commonplace.
The first thing you need to know as the adult child of an in-debt deceased parent is that it is very likely you have no legal responsibility to repay your parent’s debts. The exception to this might be if you shared a credit card account or co-signed for them for a loan or line of credit.
Certain assets that your parent had may also pass directly to you and other heirs without needing to go through probate. These include:
- Life insurance policies
- Bank accounts that are payable on death
- Retirement benefits
- Accounts with named beneficiaries that don’t include the decedent’s estate
If you are the administrator of an in-debt parent’s estate, you need to be very careful in how you manage and disburse any assets. You could face very unpleasant legal and tax consequences by liquidating assets that were owned by a debtor. In those cases, it is usually advisable to seek the counsel of a North Carolina estate and probate law attorney to avoid running afoul of any state or federal laws.