When a loved one passes away, understanding how their debts affect you is crucial. Inflation has risen to 4.2%, leading many to rely on credit cards and loans. As of May 2026, U.S. consumer debt reached $18.23 trillion, with credit card debt making up $1.1 trillion. The average credit card rate is nearly 22%, making it challenging to escape debt, even for disciplined borrowers.
Beyond credit cards, there are personal loans, home equity loans, car loans, and possibly inherited debt. Inherited debt is unique, with many misconceptions surrounding it. Let’s uncover some of the biggest myths about inherited debt with insights from experts.
Misconception #1: All Types of Debt Can Be Inherited
Not all debts transfer to heirs. Generally, debts are settled by the deceased’s estate, not by heirs. “In most cases you do not inherit a loved one’s debt because you are their heirs,” explains Skip Skolnik, senior planner at Skolnik Retirement Solutions. Debts might include co-signed or jointly held debts. Co-signers or joint account holders often assume full responsibility if a borrower dies.
In community property states like Texas, California, or Arizona, you may inherit a spouse’s debt. Some states also expect you to cover a deceased spouse’s medical bills.
Misconception #2: A Mortgage Is the Same as Any Other Debt
An inherited property with a mortgage differs from other debts. “When you inherit a mortgaged property, you’re subject to that debt,” says Chris Kampitsis, certified financial planner at Barnum Financial Group. To keep the property, you must maintain mortgage payments, property taxes, and insurance. Alternatively, selling the property and using the proceeds to repay the loan is an option.
Misconception #3: There Are No Options If You Co-signed or Co-held the Debt
If you co-signed or shared a debt, you become responsible for it after the other party’s death. But this doesn’t mean you are stuck with the existing loan terms.
“Negotiate better terms with the lender,” advises Eric Elkins, CEO of Double E Financial Solutions. Selling an asset like a car might also offset or eliminate the debt. Consider life insurance policies for both debtors to cover outstanding obligations.
Misconception #4: If the Estate Can’t Pay Off a Debt, You Have To
The deceased’s estate typically covers debts. If the estate cannot meet the outstanding balances, beneficiaries usually aren’t liable. “If the estate is insolvent, these debts may be written off or go unpaid,” says Al Kingan, an estate and business planning executive at MassMutual.
Misconception #5: You Don’t Need Help With Inherited Debt
Managing inherited debt can be complex. Seek professional guidance to understand the estate’s details fully. “These situations can be complicated,” Skolnik advises. A team of tax professionals, estate planners, attorneys, and investment specialists can provide a comprehensive plan.
Be wary of debt collectors post-inheritance. Avoid making major creditor payments before confirming legal responsibilities. “Your first step is to determine whether the debt belongs to the estate or if you have any personal legal responsibility,” suggests Skolnik.
The Bottom Line
Inheriting debt is less common than believed, but co-signed loans, joint accounts, and mortgages can result in obligations. Understand your legal responsibilities before paying creditors. If debts become overwhelming, options like debt settlement or consolidation may ease the financial burden.
Edited by Angelica Leicht