Who is responsible for medical bills of deceased parent

It's not unusual for a person to pass away and leave behind some unpaid debt.

For the heirs — typically the surviving spouse or children — the question often is what, exactly, happens to those obligations. The answer: It depends on both the type of debt and the laws of the state.

A person's assets — no matter how meager or massive — become their "estate" at death. That includes their financial accounts, possessions and real estate. And, generally speaking, it's the estate that creditors go after when they try to collect money that they're owed.

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"Fortunately for surviving spouses or other beneficiaries, in most cases that debt isn't something they'd be responsible for," said certified financial planner Shon Anderson, president of Anderson Financial Strategies in Dayton, Ohio.

However, there are some exceptions.

First, though, some basics.

The process of paying off all your debt after your death and then distributing any remaining assets from your estate to heirs is called probate. Each state has its own laws governing how long creditors have to make a claim against the estate during that time. In some places it's a few months. In other states, the process can last a couple of years.

Each state also has its own set of rules for prioritizing debt that should be paid from the estate, said Steven Mignogna, a fellow with the American College of Trust and Estate Counsel.

"In most states, funeral expenses take priority, then the cost of administering the estate, then taxes and then most states include hospital and medical bills," Mignogna said.

However, he added, not all of a person's assets necessarily are counted as part of an estate for probate purposes.

For instance, with life insurance policies and qualified retirement accounts (e.g., a 401(k) or individual retirement account), those assets go directly to the person named as the beneficiary and are not subject to probate. Additionally, assets placed in certain types of trusts also pass on outside of probate, as does jointly owned property (e.g., a house) as long as it is titled properly.

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In fact, a person could pass away with an insolvent estate — that is, one lacking the means to pay off its liabilities — and yet have passed on assets that didn't go through probate and generally can't be touched by creditors.

However, a handful of states have "community property" laws, which make debt at death a bit more complex.

Generally, those states view both assets and certain debt that accumulated during the marriage as equally owned by each spouse — meaning a surviving spouse could be responsible for paying back the debt, even if it was only in the decedent's name.

"Debt that couldn't have been avoided during the marriage — like medical expenses or a mortgage — generally becomes the responsibility of the surviving spouse in community property states," said CFP Bill Simonet, principal advisor at Simonet Financial Group in Kyle, Texas.

Yet that doesn't mean you'd have to pay all of it, he said.

"A well-structured letter with a copy of the death certificate can lead to debt being discharged," Simonet said. "In the probate process, you let the company know the estate has little to no assets to cover the debt and you ask that it be forgiven."

Also, any time you jointly own debt — i.e., you cosigned a loan — you're expected to continue paying if the other person passes away.

"You can ask for debt you cosigned to be forgiven, but don't expect the request to work," Simonet said.

It's worth noting that federal student loans, unlike most forms of debt, are forgiven if the student dies. Parent PLUS loans — often held by parents to help pay for education expenses not covered by other forms of financial aid — are discharged if either the student or the parent who took out the loan passes away.

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Are you liable for your deceased parent's medical bill?

It’s no secret that the cost of medical care is high, and keeps getting higher. Medical debt is the number one cause of bankruptcy in the United States, and many consumers are one car crash or major illness away from crushing medical debt. It’s true for everyone, including your parents. But what happens if your parent dies after incurring extensive medical debt. Losing a parent is hard enough. Do you really have to worry about their medical bills, too?

Does their medical debt follow you from the grave?

Well, the short answer is usually not. But the long answer is more complex. Read on to learn why.

First, let’s make this one thing clear:

You are not personally liable for your parents’ medical debt.

They can’t force you to pay your parent’s medical bills.

That doesn’t mean that it won’t affect you financially. But it does mean the hospital doesn’t have a legal basis to come after you personally for payment.

That doesn’t mean they won’t, though.

Here’s the thing.

The hospital can also choose to sell your deceased parent's medical debt to a collection agency. In that case, the debt collector may come to you for the money, instead of or in addition to attempting to collect from the estate.

Don’t pay them.

Why? Because of the first point we made, above: you are not personally liable for your parents’ medical debt.

So, who is then?

The Estate

Like any other creditor, they can come after your deceased parent’s estate.

If your parents left a will, then the executor will use their estate’s assets to pay off all types of debts, including taxes, housing, rent, credit card debt, and medical bills.

Of course, not every estate has assets. Some estates are just insolvent.

An Insolvent Estate

If the executor determines that there aren’t enough assets to pay off all the debts, then they will liquidate whatever assets there are and use the proceeds to pay off as much of the debt as possible. When that happens, the estate is insolvent, and your beneficiaries will get nothing.

That usually means you, your siblings, any other surviving family members, and anyone else named in the will. This could be a significant problem for a surviving spouse who was planning on the money from the estate for their support. But there’s a silver lining: they will not be on the hook for the remaining debt.

A Solvent Estate

On the other hand, if the executor determines that the estate’s assets are sufficient to pay its creditors, it will be considered solvent. The debts will be paid, and the remaining assets given to the will’s beneficiaries.

What if the debt collector harasses you for the money?

Unfortunately, some debt collectors pursue the debtor’s relatives for the money, which means you may get collection calls for your parent’s medical debts.

But remember what we said above?

You are not liable for your parent’s debts.

So the collectors can’t take any legal action against you. In fact, if they harass you in pursuit of the money, you can take action against them.

The Federal Trade Commission, the Consumer Financial Protection Bureau, and many state’s consumer protection agencies have rules against this kind of behavior, and provide for fines against the perpetrators. Fines you may be able to collect by filing a complaint.

All in all, losing a loved one is terrible, and the drudgery of navigating the probate process doesn’t make it better. But remember: while their estate is liable for paying your parent’s debts, medical and otherwise, you are not.

Still, if you find yourself in a situation like this, it’s always best to consult an attorney. OVLG would be a great place to look for one.

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