Dave Says: You Don't Inherit Debt

Dear Dave,

My in-laws have lots of debt. In fact, they’re always joking that the debt they’ll leave us is more than the inheritance. How will this affect my wife and family if they die with all their debt still in place?

Matthew

Dear Matthew,

You do not inherit debt. Either your in-laws are misinformed, or it's just a bad joke on their part. Now, if you were foolish enough to co-sign on a loan with them, then you'd be liable for the remainder of that loan. But if they ran up $100,000 in credit card debt on their own before they died, then the credit card companies just don't get paid. It wouldn't cost you a dime, except that you might get no inheritance from them because what they left behind would be sold to pay off as many creditors as possible.

Here's an even bigger example. Let's say they owned a home, and they're behind on the mortgage or upside down on the house—meaning that they owed more on it than it's worth. You can just hand it back to the mortgage company. You're not legally or morally obligated to accept the house and the situation surrounding it because it was left to you in a will. Just because it's family doesn't make it jump over onto your plate!

Let me say it again, Matthew. You don't inherit debt. Don't let creditors, or anyone else, tell you differently.

—Dave