When someone dies in California, who is responsible to pay the debts? The simple answer is the estate, but that’s not such a simple matter in most cases. The reason it is not so simple is because most people do not require a probate estate to be opened. If all of your assets pass through a probate estate, then creditors are dealt with as part of that process. The creditors receive notice of the estate administration, and the creditors then have an affirmative duty to file a creditor’s claim with the probate estate if they want to be paid. If a claim is not filed by the deadline, then the creditor is out of luck.
Can a creditor go after a child to pay the debt instead? No. In most cases, a decedent’s family is not responsible to pay the debts of a decedent. That means a creditor cannot force you to pay for the debts of your parent(s).
There are a few exceptions. For example, if your parent had a mortgage against his or her house that was secured by a deed of trust, the mortgage company can still foreclose on the home if the loan payments are not made. Most secured assets—like cars, houses, margin accounts—can be recouped by creditors under the terms of the loan agreements. But that is still not collecting money from a child, it is just collecting money from the asset securing the loan—big difference. In other words, a creditor may be able to repossess a car if the loan payments for that car are not made, but they cannot force a child to make the car payments.
The other exception is where a loan is either co-signed or guaranteed by you. If you co-sign or guarantee a loan your parent secured, then you independently could be liable to pay that debt after a parent dies. But that is a separate legal agreement that you voluntarily entered into by co-signing or guaranteeing the loan in the first place. If you do not voluntarily agree to be a co-signer or guarantor, then you are not liable on the debt.
The fact remains that you, as a child of the decedent, are not liable to pay the debts of a parent. And if you have a sibling who demands you pay a debt, there is no need to do so.
The creditor does have rights to try to enforce the debt. First, the creditor can open a probate estate if no one else does so and file its claim in that estate. If the probate estate has no assets, then the creditor can go after any revocable Trusts that the decedent created during lifetime. This allows the creditor to trace the decedent’s assets to satisfy the debt. But this only applies to the decedent’s assets—not yours. A creditor never has the right to obtain your money to pay for a parent’s debt.
If you are asked to pay for a debt of the decedent, the first question you should ask is, who is obligated to pay? If the decedent is the only one who secured the loan, or debt, then only the decedent’s estate or Trust should pay—not you. This applies to almost everything, from credit cards to business loans. Any type of debt held only in the decedent’s name is due and payable only from the decedent’s assets—not yours.
The next question you should ask is: are any assets secured to pay the debt? For example, a mortgage loan against a house will likely be secured by a deed of trust. The deed of trust will allow the mortgage lender to foreclose on the property if the loan payments are not being made. If you want to keep the house, then you had better make the loan payments until you figure out how to sell or refinance the home. If you do not want to keep the house, then don’t bother making any payments. You are not obligated to pay the mortgage and the worse that will happen is foreclosure of the home.
The same is true for car loans secured by a vehicle. If you want to keep the vehicle, then you have to make the car payments. If you do not want to keep the vehicle, then don’t bother making payments. It’s just that easy.
So if a sibling ever asks you to pay a debt for a deceased parent, you have a few questions you need to ask before agreeing to do so. And in most cases, you won’t need to pay that debt.
