Inheriting something sounds straightforward. However, it usually comes with hidden strings, with family members suddenly receiving phone calls & banks sending letters. The good news is that a lot of those aren’t actually yours to take on. Here are eleven surprises you shouldn’t accept when you inherit. Which one surprises you the most?
Just remember, this isn’t legal or financial advice, and you should always consult a lawyer before making any decisions.
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Debt collectors can’t make you pay with personal funds
Whenever a parent or relative passes away with a stack of credit card bills, that doesn’t suddenly become your balance. Sure, collectors may call. But the Federal Trade Commission makes it clear that collectors may only ask the estate to pay & you can even tell them to stop contacting you in writing.
Mortgage servicers must recognize “successor” homeowners
Anyone inheriting a house with a mortgage still attached should know that lenders can’t just brush them off. Federal rules require them to confirm you as a successor in interest, which means you’re able to get account information & make payments. You’re also able to apply for assistance.
Inherited IRAs aren’t automatically payable at once
Some banks try to encourage heirs to take the money right away. However, retirement rules say otherwise, and if you’re a non-spouse who inherited an IRA after 2019, you usually have up to 10 years to draw it down. Spouses & other loved ones may also get extra options, including treating the IRA as their own or spreading withdrawals out differently.
Medicaid estate recovery has federal limits and waiver rules
When Medicaid paid for long-term care, states sometimes try to recover those costs from the estate later. Yet they’re barred from doing so when a surviving spouse is still alive, or if the decedent left behind a minor child. It’s the same case if the child is disabled. On top of that, every state must also offer hardship waivers so that heirs may appeal.
A qualified disclaimer lets you refuse an inheritance
Not everything is worth accepting, such as property with huge debts or tax burdens. Federal law allows you to file a qualified disclaimer that has to be in writing & delivered within nine months. You also can’t touch the property first. After that, the inheritance passes as though you’d died before the original owner, which may help to reduce some of your liability.
Funeral bills shouldn’t be sent to heirs personally
A lot of people don’t realize that they’re not automatically on the hook for a funeral invoice just because they’re related. Unless you signed a contract with the funeral home, that bill belongs to the estate & probate law treats funeral costs as an estate expense. The executor needs to handle these. They’re not to be billed to grieving relatives.
Creditors can’t extend deadlines past state law
It really doesn’t matter that collectors keep writing you letters because the law has a limit on when they can make a claim. Once the statutory window closes, that’s it. They’re not allowed to enforce the debt through the estate. Of course, states differ on how long creditors get, but the executor has every right to reject any demands after the deadline.
Joint account debt doesn’t always fall on you
Unfortunately, credit card companies often muddy the waters with debt. Yes, true co-signers do have to pay off the balance, but it’s a different story for authorized users since they’re not liable. Collectors may still call & hope you’ll pay anyway. But you shouldn’t. Instead, ask to see the account paperwork, as the estate, not you, has the actual liability.
Executor fees can’t be inflated beyond statute
Executors do get paid, yet state law keeps it in check, with the fee often being tied to the size of the estate, and percentages drop as the estate value goes up. However, some people assume they can claim whatever number they like. You can challenge any inflated bill for services through the probate court.
Out-of-date beneficiary designations don’t create new rights
Insurance companies & banks pay based on the most recent beneficiary forms they have on file. But an old form naming a divorced spouse or someone who’s passed away doesn’t revive that person’s claim. Plan administrators must follow their records. If something looks off, ask for the current paperwork, and don’t just assume the first copy you see is still valid.
Utility companies can’t demand heirs pay old bills
Sometimes, utilities chase the family when someone dies with overdue gas or electric bills, although they’re not personally responsible unless the account was in their name. Those debts are like any other. They go through probate. In fact, some states stop utilities from cutting service while the estate is sorted out.
Sources: Please see here for a complete listing of all sources that were consulted in the preparation of this article.
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