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Dave Ramsey says: Parents’ debt wouldn’t be held against children

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Dear Dave,

My parents are getting up there in years, and they aren’t really prepared for when they pass away.

They can’t afford life insurance at this point, and they also have a lot of debt.

When they die, who will be liable for their debt?

— Tammi

Dear Tammi,

Any outstanding debt your parents have upon passing will likely go against their estate.

If they have a positive net worth, meaning they owned more than they owed, there will be money left over after the debts are paid. This could go toward an inheritance.

If they have a negative net worth, which means they owed more than they owned, everything could be sold off to cover as much of the debt as possible.

Regardless, you would only be held liable for any of their debt if you were a co-signer on the loans.

I’d also suggest getting their permission to buy burial policies on them.

If they won’t agree to this, you might have to save up money for their final expenses yourself.

In most areas, $10,000 to $15,000 is enough to cover basic burial costs for two people.

— Dave

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