Say My parents (Im 37) were in financial ruin.(mortgage default,very large credit card debt,IRS,whatever) And say that they were both hit by falling Russain space debris and killled.Could I be held responsible for this debt? This is hypothetical of course its just soemthing I’ve always wondered…
-TM
I apologize for not having any cites (I’m getting ready to leave the house for a day of holiday travel) but I heard on a financial radio show that you are not responsible for your parents’ debt. Once they die, it can’t touch you. I believe if they have significant assets, those assets can be auctioned off to help pay the debts but I’m not sure about that.
If you had cosigned for any of their debts - for example if you had signed a mortgage with them - then you are of course now responsible for that debt. If your name is on the paper then you would be responsible. Otherwise, it’s up to your parents and how the assets are dealt with post space accident.
At least, this is what I remember hearing. I’m sure other Dopers will be around to correct the parts I got wrong! 
Nope, children are not held liable for their parents debts. The debts will belong to the estate. If the estate does not have enough assets to cover the debts, those with priority are paid first (IRS, taxes) then those left split whats left. My MIL died with over $20,000 in debts and zero assets, her debtors got a copy of the death certificate and nothing else.
Thanks.I figured as much…
My ex-wife is a palliative care specialist looking after people generally dying at home. I recall her telling me once about a “former” client of hers who had recently died. Her children on checking her mail discovered an invoice from a bank for a payment on a loan. The son-in-law rang up the bank to explain that his MIL was dead and ask what they had to do. The woman at the bank was very sympathetic and explained that they just needed proof of the MIL’s death and that would be the end of it.
Later on it turned out that the MIL, knowing she was going to die, had run around racking up huge amounts of debt and spending it all on her children and grandchildren.
No-one had to repay a cent of the debts. Apparently this is because the loans are insured.
THis is what we experienced when my dad died, leaving tens of thousands of dollars of debt. The first step was stopping the hemorraging by calling all the credit cards and banks and telling them he was dead. The next step (and it’s a doozy) is getting executorship and all that crap worked out so that someone is legally allowed to communicate and make decisions on behalf of the estate. What we ended up doing was selling his property for what we could get for it (having had it appraised by a real estate appraiser so they knew we weren’t selling it for too little money), and then making an arrangement with all creditors for cents on the dollar to re-pay as much of the debt as we could (from the estate - none of our personal money was ever involved). All the creditors got the same percentage of their debt repaid, but if there were no assets, all of the debts would have been written off. The real kicker here is anything co-signed - if there is another person’s name on any debt, the other person gets to re-pay the whole debt if the other person dies. We could have all just walked away from the entire thing - you can’t be forced to deal with someone else’s estate.
So, Tony, if you don’t co-sign anything with your parents, you should be okay.
One thing that happens, unfortunately, is identity theft by parents toward their children. In the case of someone dying, I suppose it’s not irreversable, just a PITA to get straightened out–if the parent is still alive when the theft is discovered, it’s a huge dilemma because you have to charge your parents with fraud to get untangled.
What’s to stop a parent-child scam, in which the child was complicit in the plan to spend and die?
Not that it helps the banks etc, but isn’t any large gift from a parent who then dies within 8 years (I think that’s the figure in the UK) subject to inheritance tax?
What’s the dilemma?
People have been known on occasion to experience feelings of compassion for family members even when it’s not in their own self-interest.
Damn, I feel bad for them
As for the question at hand…the answer is not in the US. Probably quite a few other first world countries, too.
My father died a few years back, in fairly serious debt. I had only seen the guy once since I was about seven, so I had no relationship whatsoever with him, aside from having talked to him on the phone a few times. Unfortunately, I was the only heir the family could find.
I got a call a few weeks later from some creditor, asking me how I was going to settle my father’s debt. I told 'em, “Yeah, good luck with that. Oh, and by the way, never call me again.”
Nope, never heard from 'em again.
I’ve wondered that too. What’s to stop parent say dieing of cancer from doing an app-o-rama, and slowly over time withdrawing cash and handing it to kids, under the table? Those app-o-rama’s can net huge balances.
What if, in one of those loans that a dying person takes out, they use their house as collateral on the loan? Only the person’s name on the mortgage and deed that has died. Id the house now forfeit to pay off the loan, or at least can the person/company owed the debt place a lien for the full amount on the house?
EDIT: Assuming said parent doesn’t have assets…
There are two types of debt…secured debt and unsecured debt. It depends on the particular laws of the state, but generally if someone dies the secured debts are paid out of the estate first, then the unsecured debts. So things like home equity loans and mortgages and car loans are secured debt, while credit cards are unsecured debt. So if the dead person has a car loan, the creditor gets to repossess the car before the other assets of the estate are divied up among the other creditors. And as mentioned above, tax bills aren’t secured debts, but the IRS also generally gets first crack at the estate before other creditors.
On the bright side, if it’s bad enough fraud that they get sent to prison, free medical care!
Where do the deceased’s medical bills fit? Do they have any special priority?
You can give away up to $12k per year per recipient with no tax implications. Anything over $12k counts towards your gift tax eclusion limit, currently $1m. If you have given away more than $1m over the $12k each over your lifetime, then when you die the excess will be taxed . Even if you do not go over the $1m, the amount will be deducted from your estate tax exclusion, which could result in estate taxes. Either way, if taxes are due they are paid by the (deceased) donor, not the recipient.