In certain situations, selling property may be necessary to settle an estate. This usually depends on how much debt the decedent had at the time they passed away compared to liquid funds. One common scenario is when there aren't enough liquid assets or cash available to pay off the debts of all the assets in estate.
California law does allow creditors to pursue a decedent's potentially inheritable assets. In the event an estate does not possess or contain adequate assets to fulfill a valid creditor claim, creditors can look to assets in which heirs might possess interest, if: The assets are joint accounts.
However, non-community assets that belong solely to a surviving spouse are off limits. Similarly, creditors do not have the right to go after the assets of parents, children (for instance, child support), siblings, or any other family members.
If there's no money in their estate, the debts will usually go unpaid. For survivors of deceased loved ones, including spouses, you're not responsible for their debts unless you shared legal responsibility for repaying as a co-signer, a joint account holder, or if you fall within another exception.
If you inherit a house that has an outstanding mortgage, home equity loan or HELOC on it – and want to retain the house – you must stay current with payments. Even if you plan to sell the house, you must stay current with payments, until the house is sold.
Additional examples of unsecured debt include medical debt and most types of credit card debt. If you die with unsecured debt, repayment becomes the responsibility of your estate. Your legal estate refers to all the assets, property and money left behind by you or another deceased person when they die.
In most cases, debt isn't inherited and is often settled by the estate or forgiven. However, there are a few exceptions when surviving family members may be left with debt.
The executor — the person named in a will to carry out what it says after the person's death — is responsible for settling the deceased person's debts. If there's no will, the court may appoint an administrator, personal representative, or universal successor and give them the power to settle the affairs of the estate.
The debt is not forgiven because the other person died. You must continue making payments on the account to avoid penalties and negative marks on your credit. Authorized users, however, are not liable for the credit card debt.
If a creditor has already filed a claim against your inheritance and won in court, they can also go after your assets. In this case, it's best to consult with an attorney specializing in debt collection laws to help determine what steps need to be taken next and whether challenging the creditor's claim is worth it.
Setting up a living trust can allow an estate to bypass the complicated probate process—which determines if there's a valid will, who the beneficiaries are, the value of the estate and how to transfer the assets to the beneficiaries. A living trust can protect assets from creditors and reduce tax burdens.
The good news is that if you're a beneficiary of an estate, you do not inherit that estate's debts. Beneficiaries are typically not responsible for any outstanding debts that may be discovered after the probate period has passed or that can't be paid during the probate period.
If the estate runs out of money (or available assets to liquidate) before it pays all of its taxes and debts, then the executor may need to petition the court to declare the estate insolvent. At that point, the estate must pay off as much debt as possible in the order determined by state law.
A beneficiary's inheritance can be protected from lawsuits and creditors by receiving it in trust (as opposed to outright). This can make it extremely difficult for creditors to go after this money, even if insurance becomes insufficient to satisfy a judgement obtained by a lawsuit.
Under California law, debt collectors have the right to place a lien on a person's home once they get a judgment. California law then lets the debt collector force the sale of a person's home to collect the judgment, even if that property is the debtor's only home.
There is no exact limit on when you need to claim funds, and you can certainly take some time to adapt to a loved one's death. However, it's wise to act promptly. Eventually, the account may go dormant, and banks might be required to turn over dormant accounts to the state for safekeeping (usually after several years).
Avoid attending auspicious events like weddings, baby showers for the first 100 days after death. If possible, avoid going on holidays as well. As this period is termed the "mourning period", the filial thing to do would be to stay home to mourn.
Inheriting A House With A Mortgage
So, if you've inherited the home of a loved one, you can assume their mortgage and continue making monthly payments, picking up right where they left off.
But you should know that you can inherit debt that you were already legally responsible for while your parents were alive. For instance, if you cosigned a loan with them or opened a joint credit card account or line of credit, those debts are legally yours just as much as they are your parents.
Your parent's score and report won't affect yours unless you jointly hold an account with them, and the account is not paid on time, OR if your parents opened accounts in your name, and did not pay on the accounts.
It is possible to inherit a house with a mortgage attached to it. A deceased person's mortgage must be paid by the beneficiary or by selling the home. If you inherit a house, continue making mortgage payments on it, even if you plan to sell.
If no estate is left, then there's no money to pay off the debts and the debts will usually die with them. Surviving relatives won't usually be responsible for paying off any outstanding debts, unless they acted as a guarantor or are a co-signatory of the debt.
No, you don't. Any debts either spouse had before marriage remain their own responsibility, with one notable exception. If you cosign a loan for your significant other or open a joint account on a credit card before you officially tie the knot, you're both responsible for the debt after your marriage date.