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business Tuesday 1 February 2022
How your parents' debt could outlive them

By LIZ WESTON of NerdWal- one's nursing home expens-
let es, for example, the state
Many people believe one can file a claim against the
of two common myths estate or a lien against the
when a parent dies in person's home, McDowell
debt, says Chicago estate says. Medicaid eligibility
planning attorney Michael and recovery rules can be
Whitty. The first myth is that complex and vary by state,
an adult child will become which is why it can help to
liable for their parents' consult an elder law attor-
debt. The second myth is ney if a parent may need
that they can't. Medicaid to cover nursing
Adult children typically home bills, McDowell says.
don't have to pay their par- She urges planning appro-
ents' bills, but there are ex- priately "to make sure that
ceptions. And even when your family doesn't wind up
a child doesn't have to pay without a house."
directly, debt could reduce The last debts to be paid
what they inherit. include unsecured debt,
Debt doesn't simply disap- such as credit card bills or
pear when someone dies, personal loans. If there's
Whitty explains. Creditors not enough money to pay
can file claims against the those debts, the creditors
estate, and those claims get a share of whatever is
usually have to be paid be- left. Only after creditors are
fore anything is distributed paid in full can any remain-
to heirs. Creditors also are ing assets be distributed to
allowed to contact rela- heirs.
tives about the dead per- WHAT TO EXPECT WHEN
son's debts, even if those COLLECTORS CALL
family members have no Often, creditors won't even
legal obligation to pay. file a claim against an in-
If you're concerned that solvent estate if there's little
your parents' debt might hope they'll collect, Whitty
outlive them, consider talk- says. But that doesn't mean
ing to an estate planning they won't ask surviving
attorney for personalized family members to pay.
legal advice. Here are Legally, debt collection
some issues to explore. agencies are allowed to
WHEN YOU CAN AND CAN'T contact a surviving spouse
BE HELD PERSONALLY RE- or executor to request pay-
SPONSIBLE ment, and to contact rela-
Generally, family members tives to ask how to reach a
don't have to use their own spouse or executor. How-
money to pay a dead rela- ever, collection agencies
tive's debts unless they: aren't allowed to say that
— Co-signed a loan, were the debt is legally owed
a joint account holder or This undated file photo provided by NerdWallet shows Liz Weston, a columnist for personal finance by a survivor if it isn't, Whitty
otherwise agreed to be website NerdWallet.com. says.
held responsible for the Associated Press "One of the reforms that
debt. has been noticeable over
— Are the surviving spouse ity" laws on the books that for the poor. the bills get paid. the time I've been practic-
and live in a community technically could require Filial responsibility statutes Legal and other fees for ing is that collection agen-
property state or a state adult children to pay their are rarely enforced, al- administering the estate cies now must affirmatively
that requires surviving impoverished parents' bills, though in 2012, a nursing are paid, as well as funer- state that the surviving
spouses to pay debts such says estate and elder law home chain used Pennsyl- al and burial expenses. A family members are not
as medical bills. attorney Letha McDowell vania's law to successfully temporary living allowance obligated on the debt," he
— Were legally responsible of Kitty Hawk, North Caro- sue a son for his mother's may be provided for de- says.
for settling the estate and lina. $93,000 bill. Some legal ex- pendent spouses and chil- Of course, collection agen-
didn't follow state law. These laws are holdovers perts have predicted more dren, depending on state cies aren't known for al-
For example, if you're the from a time when debtors such lawsuits as long-term law. Secured debt such ways following the law. If
executor of your parent's prisons existed, says Mc- care costs rise, but so far as mortgages or car loans you're contacted by an un-
estate and distribute mon- Dowell, who is president of that hasn't materialized, must also be repaid or refi- ethical or abusive collec-
ey to yourself or other heirs the National Academy of McDowell says. nanced, or the lender can tor, consider filing a com-
before paying off creditors, Elder Law Attorneys. Their HOW CREDITORS GET PAID – claim the property. Federal plaint with the Consumer Fi-
the creditors could sue you use has faded since the INCLUDING MEDICAID taxes and other federal nancial Protection Bureau.
to get the money back. 1965 creation of Medicare If someone dies with more debts have a high prior- You can do that, and learn
SHOULD YOU FEAR 'FILIAL — the health coverage debt than assets, their es- ity for repayment, followed more about your rights un-
RESPONSIBILITY' LAWS? program for people 65 and tate is considered insolvent by state taxes and debts, der the Fair Debt Collection
More than half of the states over — and Medicaid, the and state law typically de- Whitty says. Practices Act, at the CFPB
still have "filial responsibil- health coverage program termines the order in which If Medicaid paid for some- website.q