Over the years, I have received many questions from clients and others regarding estates. A very common question is, “Who will be responsible for the debts of my parents when they are gone?” This question is most concerning when you become aware that your parent(s) do not have sufficient assets of their own to pay their debts.
Children are not personally responsible for their parents’ debts. Your parent’s estate will be held responsible for his or her debts and, if there are any assets left over after all debts and expenses have been paid, the beneficiaries of his or her estate will receive the remaining amount according to the terms of his or her will, or the heirs according to the laws of intestate distribution of the state in which your parent resided at the time of his or her death. If there are insufficient liquid assets within the estate to pay all debts and expenses, then real estate (along with any other non-liquid assets) will need to be liquidated in order to pay these debts and expenses.
Note that the beneficiary of a life insurance policy is typically not responsible for paying the debts of the decedent or the expenses of his or her estate from the proceeds of the life insurance policy because the proceeds are not part of the probate estate. However, in Wisconsin, even death proceeds from life insurance policies are now often recoverable under the Estate Recovery Program if your parent received Medical Assistance.
Source: New feed