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What Happens to Debts of the Deceased?

You may be wondering what happens to the debts of the deceased. For example, if your spouse or parent racked up a substantial amount of debt, do you have to personally pay the debts when they pass away?

Unfortunately, there is no easy answer to this question. While a beneficiary of someone's estate is generally not personally liable for the debts of the estate, that person can still see the potential inheritance reduced to nothing. And if the debt is joint -- like a home mortgage between spouses -- you may even be on the hook.

In New York, debts of the deceased are taken from the estate before the beneficiary sees a cent. In addition, costs of the death like funeral expenses, expenses of administering the estate, and taxes are also taken from the estate before you receive anything.

So if your grandparent bequeathed to you $3,000, and your grandparent had $10,000 debt, your inheritance could be reduced to nothing after the debt is accounted for.

However, as your liability is likely capped at the $3,000 you were given, you would probably not be liable for the remaining $7,000.

Still, you should be aware that certain types of debt run with the assets -- like car loans and home mortgages. So, if you take over a house or car, you may still be liable for the debt on those. In addition, spouses should be aware that debt of their significant other could be considered your debt as well.

Debts of the deceased can be complicated, and to ensure that your loved ones don't inherit debt, you may want to speak with an estate planning attorney.

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