If your parents have a lot of debt, you have probably wondered if you will inherit this in Massachusetts. The complicated answer is that it all depends. There are a lot of procedures and laws behind how creditors make their claims and what the government allows them to take.
This can be a frustrating and stressful addition to the already difficult process of recovering from the loss of your parents. Here are a few things you should know that may help to provide some clarity.
Cosigning on loans
If you cosign on your parents’ loans then you may become liable after they pass away, says CNN. It is reasonable to conclude that this may occur because by cosigning, you accepted liability for the loan in the event that your parents defaulted. Unfortunately, even when death is the reason for a default, from the creditors’ point of view, the debt needs to be paid.
Subtractions from the estate
The government typically provides creditors with a fixed period of time to stake their claim on your parents’ estate to repay debt. Your parents’ home and other assets may be sold to repay that debt. Once the debts are paid, you may become entitled to what remains. However, if the assets are not enough to cover the debt, all the assets may be taken to cover what they can and you may lose your inheritance.
Protect the IRA
While your parents are in the process of estate planning, it’s a good idea to ask to be named as a beneficiary on their IRA or 401(k). This may help to protect it from creditors in the event that debts are claimed against the estate.
Coping with the loss of a parent can be devastating. Dealing with the calling of creditors and navigating inheritance laws make it even more so. For this reason, many parents plan ahead by creating solid estate plans to protect their children’s inheritance. While this does not always keep creditors at bay, it’s a step in the right direction.
The information contained in this article is purely education and should not be interpreted as legal advice.