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When can a beneficiary inherit debt?

Just as men and women in Florida, and throughout the rest of the United States, can inherit property and other assets, they might also inherit debt tied in with a deceased loved one's estate. A lot of people might think that if they are the sole beneficiary to a person's estate, that there is no negative that can come with it.

A current trend in Florida illustrates some of the potential pitfalls of inheriting a deceased loved one's estate.

A financial planner and estate attorney in Florida said that he has seen a lot of men and women inherit condominiums left behind by their parents. In many of these cases, the price tag on the mortgage for the condo was more than the condo was actually worth. Instead of inheriting something of worth, these people are inheriting debt.

Rest assured, there are provisions set in place that protects an unassuming beneficiary from having debt piled on them from a deceased loved one. Normally, personal debt like medical bills and student loans are scratched upon the debtor's death. This debt cannot be passed on to loved ones, nor are they responsible to make things right with creditors.

The only way a loved one would be held responsible for paying off the debt is if they were a co-signer on the loan. They then must pay off the remaining balance of the loan. This is commonly seen when adult children co-sign with aging parents for loans to pay for things like medical bills. The same applies for joint credit cards. Even if the remaining loved one did not rack up the debt, they will be responsible to pay it off.

If a man or woman dies with debt, and they have the assets to settle that debt, all debt will be deducted from the estate. Whatever is left over after will go to the beneficiaries of the estate.

Source: Business Insider, "Here's what happens to debt when you die," Shelly K. Schwartz, March 25, 2012

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