What to do when you inherit a money mess

What to do when you inherit a money mess

Category: Estates | Inheritances

Inheriting a Money Mess

When a loved one dies, it’s one thing to have to go through a basement full of boxes and quite another to get stuck with the departed’s debt.

From tax liens and credit card bills to mortgages and student loans (debt that is at record levels among seniors) heirs are often forced to contend with creditors when they become beneficiaries to an estate.

“It happens all the time,” said Austin Frye, an estate planning attorney and certified financial planner with Frye Financial Center in Aventura, Fla. “Even with wealthier estates, there are still debts to be dealt with. Some of that debt sticks to the asset itself and some is just general estate debt, and they’re dealt with differently.”

Am I always responsible?

Generally speaking, Frye said, you’re not obligated to pay the bills a decendant leaves behind. But you won’t be able to inherit any part of the estate until creditors are made whole.

There are, of course, instances in which another’s financial loose ends become your headache.

Those who co-sign for a loan, for example, are financially liable for that debt if the borrower defaults or dies, said David Mendels, a certified financial planner with Creative Financial Concepts in New York.

For that reason, adult children particularly should be wary of attaching their name to loans for mortgages, nursing home care or medical procedures for an aging parent, he said.

Widows and widowers living in so-called community property states, in which property acquired during a marriage is considered jointly owned, may also be on the hook for a deceased spouse’s debt.

Those states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

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See the original article here: https://www.cnbc.com/2013/10/08/what-to-do-when-you-inherit-a-money-mess.html

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