Normally you cannot inherit someone else’s debt.
However, there are key exceptions, as this California couple’s story shows.

A recent article in the Christian Post, titled Grieving Pastor Parents Inherit Deceased Daughter’s $200,000 School Loan Debt; Salaries Can’t Even Cover Minimum Payments, tells the story of the Mason family of Redlands, California. Steve and Danielle Mason co-signed for their daughter’s private student loans so she could attend nursing school. If everything had gone according to plan, the daughter would have eventually paid off the loans. However, she unfortunately passed away before she could do so. The debt was originally $100,000, but interest and late fees have nearly doubled the amount owed. Because the Mason’s co-signed the loans, they are responsible for paying the full amount and have inherited the debt. If the loans had been public student loans, the debt would have ceased to exist when the daughter passed away. Unfortunately for the Masons, private student loans, just like public student loans, cannot be discharged in bankruptcy.

Any time you co-sign a loan, you are responsible to pay if the debtor does not. The mistake the Masons made was their failure to properly plan for their daughter’s college education. While it is not always possible to fund all the educational expenses, estate planning attorneys can help. For example, trusts and college savings plans can be used to ensure that children have enough money for school without costly private loans that have to be co-signed. This is something that every American family should discuss with an estate planning attorney long before the children are ready to attend college.

For more information, please visit my estate planning website.

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Philip J. Kavesh
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