Most of the time, a deceased individual is going to have at least some level of remaining debt. This doesn't even count the funeral costs, which the family would likely have to cover, and things of this nature. It's just a reflection of the way that most people live paycheck to paycheck and a lot of people have credit cards and other forms of debt. Many homeowners have mortgage loans, car owners have car loans, and the like.

But if one of your family members recently passed away and you know that they have a lot of debt, who takes care of these financial accounts? Do they pass down to the next generation? Would heirs be responsible for paying off that debt?

The estate pays off the debts that it can

As a general rule, the way that this works is that the estate itself has to pay back those debts. When the estate executor takes inventory of the assets that the person owned, they're also going to look at the debt. They can use assets from the estate to pay down those debts and distribute the remaining assets to the heirs.

There are rare exceptions in which a specific heir may be responsible for the debt. Maybe an adult child decided to co-sign on a car loan with an elderly parent, who then passed away before the car was paid off. That adult child would still be responsible because they are listed on the loan. But debts that were simply incurred by the elderly individual on their own are not going to transfer to the next generation.

When estate planning and distribution gets complicated, it's quite important for all involved to know what legal options they have.